Apple Inc AAPL is scheduled to report its quarterly earnings on Thursday.
On CNBC's "Options Action," Tony Zhang said that Apple’s stock has been on a “slow and steady uptrend for the past couple of years” but recently there has been “a breakdown of that trend.”
The risk reward now “favors to the downside going into the earnings event,” he added.
Check out other tech stocks making moves in the premarket.
Apple is currently a slow growing business, Zhang mentioned. “If you look at EPS and revenue growth, we’re looking at single digits over the next couple of years,” he said.
Also Read: Apple's Challenges Go Beyond Latest Economic Concerns; Why This Analyst Feels Cupertino Can Bounce Fairly Quickly
The stock is currently trading at nearly 24 times next year’s earnings, which is “a pretty rich multiple to where the S&P is trading right now,” Zhang stated. He expects a multiple contraction if the guidance is unfavorable for the rest of the year.
AAPL Price Action: Shares of Apple declined by 0.81% to settle at $154.09 on Friday.
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