Should You Buy Apple Ahead of Earnings?

It's another big earnings week as tech giant Apple (NASDAQ:AAPL) reports its third-quarter results on Tuesday. The last time the company posted its quarterly earnings, back in April, it was an impressive performance with sales growing 54% year over year. Its per-share earnings of $1.40 were also well above the $0.99 that analysts were expecting. It was a similar story in January when its first-quarter numbers also marked the first time its revenue hit more than $100 billion in a period.

With the economy in rebound mode, it could be another strong quarter for Apple. But the question is will it be enough to lift its shares much higher – year to date they are up 12% and the stock is trading right around its 52-week high. Apple generally does outperform on earnings but that doesn't always translate into a big boost in its share price. The last two times it reported earnings, its shares would end up falling in the weeks following their release.

The stock is trading at more than 30 times its trailing earnings – far higher than it has in years past. And it recently came out of overbought territory, with a Relative Strength Index of more than 80. Even with an earnings beat, investors shouldn't expect a surge in the stock's value.

While it may be a good long-term investment, there might be little upside left right now. Take Twitter (NYSE:TWTR) as an example. The social media company reported fantastic results last week and that wasn't enough to get it back to the highs it reached in early March.
While Apple will likely do well, it's hard to justify buying the company's shares given their inflated valuation.