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July 21, 2008

Apple Reports Tonight

I expect less positive surprise than usual for Apple when they report June quarter earnings tonight. But barring a major blowout or an unexpected miss, it is the guidance for the next quarter that will determine the immediate action in the stock price. Apple has a history of guiding below street estimates and then beating guidance and those original estimates. Thus even guidance in line with current estimates ($8.3 billion revenue, $1.24 in EPS) should be enough to drive the stock up.

A complicating factor in how the stock reacts is last week's bad reception to earnings from Microsoft and Google. Both reports had some issue but I don't think they were large yet both stocks dropped close to 10%. Also, the sharp rebound in bank and financial stocks indicates at least for the short-term their is rotation underway into beaten down stocks and away form recent leaders which include the leading tech stocks like Apple.

With those comments as background, click "Continue Reading" to see abiref preview of Apple's quarter as summarized by theflyonthewall.com.

"Apple (AAPL) is expected to report Q3 earnings Monday with a conference call scheduled for 5:00 pm ET. The consensus estimate is $1.08 for EPS and $7.36B for revenue, according to First Call. CFO Peter Oppenheimer said in April that the company expects to earn $1.00 a share in EPS on revenue of $7.2B. The "whisper" number is $1.11. The company is known for low-balling expectations and being conservative with its fiscal outlooks. Sanford Bernstein expects Apple to top the average estimates, and expects Apple to earn $1.12 a share on revenue of $7.6B. Bernstein said Apple's Macintosh and iPod sales likely were strong during the quarter, and that the company probably benefite d from U.S. consumers spending their economic stimulus checks on Apple products. The firm believes Apple will report Mac sales of 2.5M units, 10.3M iPods, and $400M in iPhone sales for Q3. As far as the iPhone is concerned, the new 3G model was released after Apple's Q3 ended in June, so none of the 1M devices that were sold in the first weekend of availability will have any effect on the upcoming results. Other Street thoughts: Piper reiterated its Buy rating ahead of Q3 results as it believes upside to Mac and iPod units may drive upside to the June quarter. The firm believes Mac units could reach 2.35M, above the Street's 2.2M estimate. Pacific Crest echos that sentiment saying that strong consumer demand for Mac and iPhone, along with an attractive component pricing environment, can drive near-term upside to estimates. Additionally, increasing enterprise penetration can add to near-term demand while extending Apple's growth period. Additionally, FTN Midwest's checks indicate Mac sales are above plan in June and July is off to a good start. Now that the initial hoopla surrounding the release of the 3G iPhone has settled down, analysts are more likely to keep their eyes on what Apple will have to say about the outlook for its current Q4. PacCrest believes Q4 guidance will likely be conservative. But, strong demand for iPhone along with a likely Macbook refresh during back-to-school should drive excellent Q4 growth". :theflyonthewall.com

Posted by Steve Birenberg at July 21, 2008 08:19 AM in AAPL