Best of the Week
Most Popular
1.What Happened to the Stock Market Crash Experts Were Predicting - Sol_Palha
2.London Housing Market Property Bubble Vulnerable To Crash - GoldCore
3.The Plan to Control ALL Your Money is Now at Advanced Stage
4.Why Gold Is Set For An Epic Rally This Spring - James Burgess
5.MR ROBOT NHS Cyber Attack Hack - Why Israel, NSA, CIA and GCHQ are Culpable - Nadeem_Walayat
6.Emmanuel Macron and Banking Elite Win French Presidential Election 2017 - Nadeem_Walayat
7.Trend Lines Met, Technical's are Set - US Dollar is Ready to Rally (Elliott Wave Analysis) - Enda_Glynn
8.The Student Debt Servitude Sham - Gordon_T_Long
9.Czar Trump Fires Comey, Terminates Deep State FBI, CIA Director Next? - Nadeem_Walayat
10.UK Local Elections 2017 - Labour Blood Bath, UKIP Death, Tory June 8th Landslide - Nadeem_Walayat
Last 7 days
SPX/NDX/NAZ Hit New All-time Highs - 27th May 17
GBPUSD Top in Place, GOLD Price Ready to Rocket? - 27th May 17
Silver Mining Stocks Fundamentals - 27th May 17
BBC Newsnight Falls for FAKE POLLS, Opinion Pollsters Illusion for Mainstream Media to Sell - 27th May 17
UK Local Election Results Forecast for General Election 2017 - 26th May 17
Stock Market & Crude Oil Forecast! - 26th May 17
Opinion Pollsters UK General Election Seats Forecasts 2017 - 26th May 17
Bitcoin and AltCoins Crypto Price Correction - 26th May 17
Bearish Head and Shoulders in EURUSD? - 26th May 17
SELL US Stocks - Massive Market CRASH WARNING! - 26th May 17
EURGBP: A Picture of Elliott Wave Precision - 26th May 17
Credit Downgrades May Prompt Stock Market Capital Shift - 26th May 17
Rosenstein and Mueller: the Regime Change Tag-Team - 25th May 17
Stock Market Top - Are We There Yet? - 25th May 17
Should I Invest My Fortune in Gold? Inaugural Lecture by Dr Brian Lucey - 25th May 17
USD/CAD Continues Decline - 25th May 17
Bitcoin Price Goes Loco! Surges through $2,500 Despite Unclear Fork Issues - 25th May 17
The US-Saudi Arms Deal - Sordid Saudi Signals - 25th May 17
The No.1 Commodity Play In The World Today - 24th May 17
Marks and Spencer Profits Collapse, Latest Retailer Hit by Brexit Inflation Tsunami 2017 - 24th May 17
Why Online Trading Platforms Are Useful for Everyone - 24th May 17
The Stock Market Will Tank Hard - 24th May 17
It’s Better to Buy Gold & Silver When It DOESN’T Feel Good - 24th May 17
Global Warming - Saving Us From Us - 24th May 17
Stock Market Forecast for Next 3 Months - Video - 23rd May 17
Shale Oil & Gas Production Costs Spiral Higher As Monstrous Decline Rates Eat Into Cash Flows - 23rd May 17
The Only Metal Trump Wants More Than Gold - 23rd May 17
America's Southern Heritage is a Threat to the Deep State - 23rd May 17
Manchester Bombing - ISIS Islamic Terrorist Attack Attempt to Influence BrExit Election - 23rd May 17
What an America First Trade Policy Could Mean for the US Dollar - 22nd May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 22nd May - 22nd May 17
Stock Market Volatile C-Wave - 22nd May 17
Stock Market Trend Forecast and Fear Trading - 22nd May 17
US Dollar Cycle : Deep Dive - 21st May 17
Bitcoin Breaks the $2,000 Mark as Cryptocurrencies Continue to Explode Higher - 21st May 17
Stocks, Commodities and Gold Multi-Market Status - 21st May 17
Stock Market Day Trading Strategies and Brief 20th May 2017 - 21st May 17
DOW Needs to Rally Big or Correction is Next - 20th May 17
EURUSD reaches DO or DIE moment! - 20th May 17
How to Get FREE Walkers Crisps Multi-packs! £5 to £28k Pay Packet Promo - 20th May 17

Market Oracle FREE Newsletter

Why 95% of Traders Fail

Don't Be Surprised by Apple Q2 Earnings

Companies / Tech Stocks Apr 24, 2012 - 06:05 AM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticleDavid Zeiler writes: Following its extraordinary beat last quarter, expectations for Apple Inc.'s (NASDAQ: AAPL) earnings are even higher than usual.

With Apple having such an outsized influence on the markets, even investors who don't hold the stock will be watching for Apple's Q2 earnings report after the closing bell today (Tuesday).


Still, with its stock having tumbled 11% in the past two weeks, from its peak of $640 April 10, Apple needs to beat Wall Street expectations.

If Apple earnings disappoint -- as occurred in the September quarter last year -- the stock will get beaten down even further. Such negative news would push the stock toward $500.

The consensus estimates for Apple's Q2 earnings are $9.99 per share on revenue of $36.6 billion, which most analysts believe is achievable.

In fact, just in the past week several analysts, such as Shaw Wu of Sterne Agee and Bill Shope of Goldman Sachs, again raised their estimates for iPhone and iPad sales.

However, Money Morning Chief Investing Strategist Keith Fitz-Gerald isn't so sure.

"I think Apple is going to miss on key sales figures related to the iPad," Fitz-Gerald said. "If they do, it's likely to spark multiple downgrades in the weeks ahead, leading to a downside "snowball effect' as the stock corrects further."

Should Fitz-Gerald be proven right - and he did correctly predict Apple's swoon in a March 27 Money Morning article - investors shorting AAPL will profit and those waiting for a pullback will get a chance to jump in.

"If I get a sense that there's a point we can step into the fray, we'll be buying," Fitz-Gerald said. "Even as we speak, institutional traders are looking to short the stock and pound the price down even more."

Fitz-Gerald thinks Apple eventually will resume its climb toward $1,000 a share, and that much of the recent decline was bound to happen to a stock that had soared 75% in just five months.

iPhone Sales Critical to Apple Earnings
Whether Apple beats expectations or not will largely depend on how well the iPhone sold.

The iPhone accounts for more than half of Apple's revenue. It's also the product with the highest profit margins (over 70% for the iPhone 4s).

Many analysts see the iPhone making up an even bigger than usual share of Apple's Q2 revenue, which will boost margins.

Concern over iPhone margins is one of the reasons AAPL stock has swooned.

Earlier this month research firm BTIG forecast that the U.S. carriers such as Verizon Communications Inc. (NYSE: VZ) and AT&T (NYSE: T) are seeking to pay less to handset makers, including Apple.

As one of the most expensive smartphones on the market, it is also one of the most heavily subsidized, which has eaten into the profits of the carriers. BTIG predicted lower iPhone sales next quarter as the carriers increasingly push cheaper Android-powered smartphones.

In addition, Verizon reported lower-than-expected iPhone sales last week, but the impact of that should be offset by higher iPhone 4s sales elsewhere in the world. For example, the iPhone 4s launched in China in the March quarter.

The iPhone consensus, or "number to beat," is 30.5 million units.

iPad Is An Apple Earnings Wild Card
Predictions for sales of the iPad, Apple's second-most important product representing about 20% of sales in the December quarter, are all over the map.

The most pessimistic analysts are calling for sales of just 9 million; the most optimistic see sales of over 15 million. Consensus is for about 12 million, which would be a year-over-year increase of 155%.

Apple did announce that the third generation iPad, which went on sale March 7, sold 3.3 million units in its first three days. Demand was so great initially that customers who ordered on line were forced to wait two to three weeks as supplies ran short.

And the company was able to launch the new iPad in 35 counties within those two weeks, which should give sales of the third generation of Apple's tablet even more juice.

The big question is whether iPad 2 sales were hefty enough in the two months-plus leading up to the debut of the new iPad to push sales past analyst expectations.

"Feedback has clearly been positive, and we suspect that expanded global distribution of the new [iPad] model should help bolster sales rates while offering the iPad 2 at lower price points should contribute to the expansion of Apple's tablet franchise," Kevin Dede, an analyst at Auriga, told The Independent.

Beyond Apple's Q2 Earnings
Apple's other units, such as its Mac business and iTunes Store, account for far less of Apple's revenue and are not expected to have a major impact on Apple earnings, although both are expected to show solid year-over-year growth.

Still, an unusually high pop in either could get investors' attention.

Such is always the case with Apple earnings; even with dozens of people poring over its every move, you can never quite be sure what you're going to get.

And perhaps even more important than Apple's earnings numbers will be any guidance the company gives.

After all, it will be future growth in the iPad and iPhone, as well as any possible "Next Big Things" that will drive AAPL toward that magical $1,000 a share target.

"We are still looking forward to iPhone 5 later this year, China Mobile on the horizon and an Apple TV," Brian White, senior analysts at Topeka Capital Markets, said in an interview on Yahoo! Finance's Daily Ticker. "We talk about Apple fever rising to $1 trillion market cap. I think that's something we'll look back in three to five years and laugh about when it's a multi-trillion-dollar company."

Source :http://moneymorning.com/2012/04/24/dont-be-surprised-by-apple-inc-s-nasdaq-aapl-q2-earnings/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife