Best of the Week
Most Popular
1.Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - Nadeem_Walayat
2.Gold and Silver Stocks Apocalypse Now, Bear Market Review - Rambus_Chartology
3.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
4.Ebola Terror Threat Suicide Bio-Weapons Threatens Multiple 9/11's, Global Plague - Nadeem_Walayat
5.Second-Richest Man Says Mortgages Now a "No Brainer" - Dr. Steve Sjuggerud
6.Gold And Silver Still No End In Sight - Michael_Noonan
7.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
8.The Gold Bug is Set to Bite Back - EWI
9.How Alibaba Could Capitalize on the EBay-PayPal Split - Frank_Holmes
10.The Consequences of the Economic Peace - John_Mauldin
Last 5 days
U.S. Economy Faltering Momentum, Debt and Asset Bubbles - 23rd Oct 14
Annuities - Afraid Your Money Will Vanish before You Do? - 23rd Oct 14
What Debt Deleveraging? - 23rd Oct 14
How to Profit from Massive Spin-Offs with Just One Play - 23rd Oct 14
Evaluating Ebola as a Biological Weapon - 23rd Oct 14
Euro, USD, Gold and Stocks According to Chartology - 23rd Oct 14
Why You Should Always Be Invested in the Stock Market (Even Now) - 23rd Oct 14
Five U.S. Housing Market Warning Signs Point to Real Estate Market Downturn - 23rd Oct 14
The Better Short: Gold or Silver? - 23rd Oct 14
Focus on Graphite Companies with Green Energy and Technology Strategies - 22nd Oct 14
Crude Oil Price Hitting Bottom - 22nd Oct 14
Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - 22nd Oct 14
Gold Or Crushing Paper Debt Stocks Crash? - 22nd Oct 14
India Gold Demand Surges 450% and Bank of Russia Demand At 15 Year High - 22nd Oct 14
Bitcoin Stock Exchange Could Be "More Valuable than Alibaba" - 22nd Oct 14
Currency War - How to Profit from a Stronger U.S. Dollar - 22nd Oct 14
Banks Hold Treasuries and Make Loans- 22nd Oct 14
Gold and Silver Timing is Everything - 22nd Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VII) - 22nd Oct 14
Follow the Baby Boom to Biotech Stock Profits - 22nd Oct 14
Copper, Nickel and Zinc Won't Be Cheap for Long - 22nd Oct 14
How Will We Know That the Gold & Silver Price Bottom Is In? - 21st Oct 14
Is Gold as Dead as Florida Hurricanes? - 21st Oct 14
First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45% - 21st Oct 14
The Similarities Between Germany and China - 21st Oct 14
The REAL Reason Why the Stock Market Turned Down - 21st Oct 14
Petrobras is a 'Scheme, Not a Stock' - 21st Oct 14
Stocks Bear Market Indicator Is Off the Mark - 20th Oct 14
Stock Market Ideal Turning Point is at Hand - 20th Oct 14
Investors Quit Complaining, The Environment is Perfect Right Now - 20th Oct 14
Ebola Armageddon Could Trigger a Rebirth in Gold and Silver Prices - 20th Oct 14
Gold vs Euro Risk Due To Possible Return of Italian Lira - Drachmas, Escudos, Pesetas and Punts? - 20th Oct 14
Stocks Rebounded Following Recent Sell-Off, But Will It Last? - 20th Oct 14
U.S. Responsible for West Africa Ebola Outbreak Says Liberian Scientist - 20th Oct 14
Stock Market Intermediate B Wave has Started - 20th Oct 14
Gold Stocks Analysis – FNV, CG, NCM, SBM - 19th Oct 14
Stock Market Primary IV Wave Counter Trend Rally - 19th Oct 14
Gold And Silver - Financial World: House Of Cards Built On Sand - 18th Oct 14
Anatomy of a Stock Market Sell-Off - 18th Oct 14
Why OPEC Has Declared an Oil War on Russia - 18th Oct 14
Gold and Silver Extreme Shorting Peaks - 18th Oct 14
Bitcoin Price Fall to $350? - 18th Oct 14
Tesco Supermarket Crisis Worse To Come as Customers Vanish! - 18th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

Why This Week's Apple Earnings Matter So Much More than Usual

Companies / Tech Stocks Jan 23, 2013 - 03:30 PM GMT

By: Money_Morning

Companies

David Zeiler writes: Monster Apple earnings in the December quarter would do wonders for Apple stock - but don't count on that happening.

Apple Inc. (Nasdaq: AAPL) earnings for Q1 2013 are due out Wednesday after market close, and Wall Street estimates range from a 14% decline to a 12% gain. Apple's own guidance is for earnings of just $11.75 per share, while the consensus on Wall Street is for earnings of $13.41 per share.


Even if Apple earnings match Wall Street expectations, $13.41 per share would actually be a decline of more than 3% year-over-year, a far cry from the stunning 118% gain the company reported last year. The psychological impact of declining year-over-year profits for the first time in nine years could ding the stock.

An actual earnings miss - even by just a few pennies - would be more dangerous for Apple stock, meaning the likelihood that Apple stock will fall after earnings is higher than usual.

Here's how Apple got in this vulnerable position.

Why Some Investors Have Soured on Apple
AAPL has been under pressure for the past four months, losing 28.4% on its way down to sub-$500 levels after peaking at $702.10 in mid-September.

Bad publicity, worries about stiffer competition among mobile devices, and negative reports hinting at slowing demand have soured many investors on Apple.

"Sentiment could not be worse," Peter Karazeris, an analyst at Thrivent Financial for Lutherans, told Bloomberg News. "It does take something fundamental to turn that, and we'll see if they can deliver."

Some reports indicate that Apple is struggling to keep up with iPhone 5 demand; others indicate that the iPhone 5 is not selling as robustly as earlier models.

But sales of the iPhone 5 - the product responsible for more than half of the company's profits -
are the linchpin of Apple's Q1 earnings. Strong sales would be reflected in good earnings and bode well for the rest of the year.

If the iPhone 5 numbers don't impress, though, it could means months of trouble for Apple stock.

"If iPhone 5 sales really are disappointing so soon in the product's refresh, then it seems fair to worry about likely sales volumes in the next few quarters before the iPhone is next refreshed," Nomura Equity Research analyst Stuart Jeffrey wrote in a note when he lowered his rating on Apple.

The heavily negative sentiment has placed more importance than most other quarters on a strong Apple earnings report, which could reverse the slide in Apple stock and send it heading back up toward $600.

"If you have a 10% to 15% beat on estimates, it will be enough to have people say, 'Oh, my gosh, Apple has its game back,'" Chris Bertelsen, chief investment officer of Global Financial Private Capital, told Reuters.

Apple Earnings: What Wall Street Will Be Watching
Apple's earnings will be even more closely scrutinized than usual as analysts look for clues on which direction the tech giant's business is headed.

Of course, Wall Street will also be watching closely to see if Apple sells the number of iPads it expects (23 million-25 million) and particularly whether the iPad Mini is cannibalizing sales of its larger sibling. If Apple sells a lot of Minis, that may still disappoint analysts because the smaller iPad has a lower profit margin.

Indeed, since Apple launched so many new products going into the December quarter, analysts expect lower margins all the way around. Overall, Wall Street expects a drop in margins from 45% last year to 38%.

Higher sales of iPad Minis and older models of the iPhone (which Apple sells at a lower cost and lower profit margin) could easily drop that number below analyst expectations, delivering another blow to Apple stock.

While there are more chances for Apple earnings to go wrong than right, optimists can take comfort in the fact that the company often defies expectations.

And despite all the gloom surrounding Apple stock lately, 48 of 58 analysts covering it still rate it a "Buy" or "Strong Buy."

The median price target remains a lofty $745. Most everyone also agrees the company is sound fundamentally.

"Three things influence a stock price: growth, value and momentum. The growth and value are there, but you've completely lost your momentum," Mark Mulholland, manager of the Matthew 25 fund, told Reuters.

Some bullish analysts remain hopeful that Apple earnings will somehow manage to surprise to the upside.

"We still expect iPhone growth. They are still pointing to a strong December quarter and, if you think there's any momentum left, that they can grow on the high end [of the smart phone market] or find growth in other sectors, this is a buying opportunity," Morningstar analyst Brian Colello told Reuters.

Source :http://moneymorning.com/2013/01/22/why-this-weeks-apple-earnings-matter-so-much-more-than-usual/

Money Morning/The Money Map Report

©2013 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

© 2005-2014 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

Free Report - Financial Markets 2014