Why Apple's Sell-Off May Be Overdone Right Before Earnings

Shares of tech giant Apple Inc. (NASDAQ: AAPL) have been under pressure, as investors continue to sell off the stock. With shares currently trading around $245, they are down close to 15% from the all-time high set just last month. The drop has been mostly one-directional and not a little surprising, given Apple’s long-standing reputation as one of the market’s most dependable large-cap performers. The broader backdrop has not helped, to be sure, as rising geopolitical tensions have driven a sharp risk-off sentiment across equities over the past week.

What makes the current setup stand out, however, is just how stretched some of the stock’s technical indicators have become. This month has seen Apple’s relative strength index (RSI) sink into extremely oversold territory, and with it currently down around 18, it's at its lowest reading since September 2008. That is an extreme level by any measure, and it immediately raises the question of whether selling pressure has gone too far, too fast, especially with earnings due next week. 

Context Matters as Apple Heads Into Earnings

An RSI reading this low for a stock like Apple would attract attention even without additional context. But with the company going into what will be a closely watched earnings report next week, the setup is all the more interesting. 

Apple has a long-standing track record of outperforming analyst expectations each quarter, and it’s in this light that the current opportunity becomes apparent. Having been sold off so aggressively, is there an argument to be made that the worst-case scenario is already priced in? 

Apple’s Fundamentals Continue to Support the Bull Case

From a business standpoint, Apple’s recent share price action looks increasingly disconnected from its fundamentals. Its track record of outperforming expectations in each earnings report is something few peers can match. Gross margins remain strong, and its ecosystem-driven model continues to generate reliable cash flow.

Apple’s capital return strategy also provides a meaningful cushion for those of us thinking about dipping a toe in. A robust share buyback program and steady dividend growth mean that management itself is a persistent buyer of the stock during periods of weakness. That obviously doesn’t prevent drawdowns like this, but it does tend to limit how long pessimism can dominate.

There are, of course, the headwinds behind the sell-off to consider. iPhone shipment volumes have come under pressure, and Apple’s valuation sits toward the upper end of its recent range. Those factors explain some of the caution, but they don’t quite fully justify the speed or scale of the recent drop.

Analyst Conviction Builds Going Into Apple’s Earnings Report

The buy-the-dip opportunity gains further strength from Apple's unyielding analyst support. This week, the team at Evercore added Apple to its tactical outperform list ahead of next week’s earnings, signaling confidence that results will exceed expectations.

A key theme in recent commentary has been the mix of iPhone sales. Higher-end models have reportedly accounted for a larger share of demand, supporting average selling prices and margins. Services revenue is also expected to remain a steady growth engine, helping offset any softness in hardware volumes.

Evercore gave Apple a fresh price target of $330, implying upside of around 35%, but that’s not even the highest. Wedbush issued a bullish update last week and a $350 price target for Apple stock, reinforcing the idea that the market has completely overreacted. Even a modest beat on revenue or earnings could be enough to shift sentiment, particularly given how washed out momentum already looks.

Apple’s Risk/Reward Skews Favorably at Current Levels

None of this makes Apple risk-free. Earnings next week will matter more than usual, and a genuine disappointment would likely trigger further weakness, especially if the geopolitical situation worsens. 

Still, the setup is looking increasingly asymmetric. There’s no getting away from the fact that this is the most oversold the stock has been in nearly two decades. For a company with Apple’s balance sheet, margins, and track record of returns, it’s hard not to want to buy into that.

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The article "Why Apple’s Sell-Off May Be Overdone Right Before Earnings" first appeared on MarketBeat.