Best of the Week
Most Popular
1.The Greatest Stock Market Crash Of Your Life Is Just Ahead… – Warns Harry Dent - GoldCore
2.Budget 2016: Borrowing, Lifetime ISA, House Prices, Economy, Syria, Brexit and Stocks - Nadeem_Walayat
3.Gold Price Intermediate Top - Clive_Maund
4.Brussels Terror Attacks, Death of the European Union, BrExit Wake up Call - Nadeem_Walayat
5.Stock Market Maybe This Time is Different? - Tony_Caldaro
6.UK House Asking Prices Break Above £300k! Housing Market Paralysis - Nadeem_Walayat
7.A Big Reason Why Silver Price Is Set To Soar - Hubert_Moolman
8.The Financial Crisis Has Just Begun; Is The American Dream Is Over? - Chris_Vermeulen
9.Gold Stocks Spring Rally - Zeal_LLC
10.GLX, GLDX, Baby Gold Bull Market Stillborn? - Rambus_Chartology
Last 7 days
Silver: The “Five Year Plan” and the Great Leap Forward - 28th Apr 16
Michael Hudson: The Wall Street Economy Has Taken Over The Economy and Is Draining It! - 28th Apr 16
AUD/USD - Trend Reversal or Just a Bigger Pullback? - 28th Apr 16
A Gold Revaluation Could Transform Your Financial Status - Overnight - 28th Apr 16
Monetary Policies Misunderstood - 28th Apr 16
Gold Bullion vs Gold Miners - 28th Apr 16
OECD Suggests BrExit Would Cut Net Migration by 1.2 Million by 2030 - 28th Apr 16
MP Naz Shah Punished for Tweets Made During Israel's Genocide of Gaza Palestinian People - 28th Apr 16
Global Recession in 2016 and Beyond - The Obvious Evidence - 27th Apr 16
Why Gold Bugs Need to Stop Listening to The Fear Mongers and Start Thinking for a Change - 27th Apr 16
BlackRock’s Fink: Fed to Raise Interest Rates by Quarter Point ‘at Best’ - 27th Apr 16
Gold More Productive Than Cash?! - 27th Apr 16
Donald Trump Will Fire Janet Yellen and Be Trapped - 27th Apr 16
Money Saving Gardening by Propagating Roses From Cuttings - Propagating Rose Plants Over 2.5 Years - 27th Apr 16
Facebook Censors Pro Trump and Negative Hillary News - 27th Apr 16
This is the Era of the Democrats and Your Taxes are Going Up - 27th Apr 16
Long Awaited Gold Price Breakout - 26th Apr 16
Crude Oil Price Double Top or Further Rally? - 26th Apr 16
Madness in the Crimex Gold and Silver Trading Pits - 26th Apr 16
Britain's Prospects: GBP and BREXIT - MAP Wave Analysis - 26th Apr 16
CRB, Gold, Oil, Cotton, Coffee - 7 Must See Commodities Charts - 26th Apr 16
Gold Price Target is $3,000 and Silver is $75 per Ounce - 25th Apr 16
Parameters for a Stock Market Sell Signal-in-the-making - 25th Apr 16
Stock Market Dangerous Divergence - 25th Apr 16
Gold Miners Nub is the Sweat of the Sun - 24th Apr 16
US Dollar Price Forecast - 24th Apr 16
Stock Market Upside Objective Reached - 24th Apr 16
Why Leftist Greeks have more reasons than Liberals to favour Entrepreneurship and Support Entrepreneurs - 24th Apr 16
The Dow Jones is a Catalyst for Misplaced Stock Market Optimism - 24th Apr 16
Why Russia Harasses U.S. Aircraft and Ships - 24th Apr 16
Stocks Bull or Bear Market Rally? - 23rd Apr 16
A Bright Future for Solar Power in the Middle East - 23rd Apr 16
Silver Commitments of Traders – Halloween is Arriving Early This Year - 23rd Apr 16
Good News, Bad News, Both Favor Gold And Silver - 23rd Apr 16
Mish's Sure Fire Proposal to End Japanese Deflation - 23rd Apr 16
Mish Shedlock: “EXCUSE ME MR. PRESIDENT, IS THAT A JOKE?” - 23rd Apr 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Catching a Falling Financial Knife

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