Apple Earnings

Andy Zaky has a good forecast for Apple earnings of $1.33 in EPS and $7.587 billion in revenue.(1) Apple's run up has gotten people nervous, some guessing that there will be a sharp fall if they miss, others making good and bad comparisons to Google. Veldemir on Yahoo Finance says it's a setup.(2)

Google high was 747 and got whacked down to 412. (45% decrease).

Apple's high was 200 and got whacked down to 115 (42.5% decrease).

Now GOOG is at 540 which is 28% off it's high.
Apple is at 161 which is 19% off it's high.

He argues that Apple will be knocked down to 28% off it's high, or somewhere around 144 after earnings.

Fortune's Apple 2.0 blog has a nice spreadsheet of analysts who have recently upped their estimates for Apple EPS and revenues.(3)

My guess is that Apple will follow the market for the next two days, closing down to allow for profit taking and uncertainty before earnings. Apple will blast through earnings, lead by international iPhone sales and a surprising beat on U.S. iPhone sales and a large beat on total Mac sales around the world. And the stock will reach 205 or higher by the end of the week. Then it will slowly dribble down again through the summer, only to reach new highs when the new iPhone and iPhone applications are released sometime in June. Overall, a rollercoaster ride, hard to time, but fun to ride.

1. Apple Set to Significantly Beat Analysts Q2 2008 Earnings Estimates
2. It's a setup folks
3. Analysts scramble to raise Apple estimates

CNBC has a good, balanced article on Google's earnings report, to be announced after the close today. Some key quotes:

Google and the experts following the company do seem to agree there is some kind of slowdown afoot; what the market has to digest is how severe it is, and what exactly is causing it. Remember that last quarter on the earnings call, CEO Eric Schmidt was clear in saying that the company was seeing no signs of an economic slowdown, no signs of recession. For a company that doesn't offer any meaningful guidance, analysts will be listening extremely closely to the comments on the conference call today to see if that position has changed any. If Google sees signs of a macro-economic slowdown, that could be bad news not just for Google, but for Yahoo, Amazon and others. Citigroup's tells me "there's a very clear bogey laid out there. We're going to see whether they'll repeat those exact words this quarter, or start fading away from them."

These shares are off better than 30 percent this quarter, so it's clear traders aren't expecting much. For the longer term investor, however, with Google closing the DoubleClick deal on the quarter, increasing its market share in search, Yahoo and Microsoft distracted by the hostile takeover and no real competitor offering any challenge to Google, slowdown or not, Google looks very attractive at these levels. If you're patient, and can stomach the short term vagaries.

It might be a good idea to see what the quarterly report says and consider buying more stock in the weeks after earnings. However, if you do not intend to hold this stock for the next 5-10 years, it may not be worthwhile to buy. A good comparison with Google is Yahoo. Back in the 90s, Yahoo enjoyed the same fanatical following that Google has now. They were the entryway to the internet, a portal through which you could find websites in the new World Wide Web. They also had a gimick search algorithm-- pages were searched by humans. Google has a similar algorithm, while it uses technology, humans are still behind it as it puts links with the most linkbacks in the top of the search. [The basics: A Web page is a bunch of media such as images and text and links that, when you click them, open up a new Web page. If a Web page has a lot of links to it from other pages (called linkbacks), it will become more popular when people search its contents on Google.]

Yahoo's IPO was in April of 1996 and it shot up fast, splitting multiple times in the next 5 years until the tech bubble burst. I think we are seeing the same thing with Google now. In another 5 years, or maybe less, new technology may come up and take over. There are already rumors that if Facebook offers an IPO, it will become the new darling of Wall Street, mainly because it is the new thing with so much promise (Wall Street likes growth companies, especially when they are new and unproven). With so much going for it, I don't think this is the end of Google. I think that it is in the beginning stages of it's run up.

Sources:
1. With Google's Earnings, Investors Need to Be Patient
2. Yahoo IPO closes at $33 after $43 peak

Mid-Week Update

Intel reported good earnings.(1) It looks like their March 3 warning was premature. JP Morgan, Coca Cola, Wells Fargo, and Abbott Labs reported before the bell today and IBM, EBAY, ALTR, and GILD report after the bell. JP Morgan's profit fell by 50%, but that didn't stop the stock from going up 5%.(2)

Although finances have been decoupled from tech in the past, it's good to see a rally in financials because it may indicate that the worst is over and things may be getting back to normal, or what will pass for normal in 2008. Everyone seems to be getting comfortable with the notion that the first part of the year will be slow and the second part will pick up. Just as you want to sell when your taxi driver starts giving you stock tips, you want to buy when news anchors admit that we are in a recession. No one wanted to admit it, but the recession started in August, and most likely will end in September of this year, with stocks reaching or exceeding their highs in December. According to Bob Doll, BlackRock's global equity CIO, "The current earnings recession of negative year-over-year comparisons will last four quarters. Q2 2008 will be the fourth."(3) He has 9 other reasons why BlackRock likes U.S. equities. So now is the best time to buy if you are an investor, or a short-term, 8-month holder who wants to buy some stocks and take a long vacation.

As of about 12:30, most indicies have blown past resistance by now, according to Brian Shannon's Alphatrends.net analysis from yesterday.(4) The Qs (QQQQ) are at 45.25, past the 43.50 level of resistance. He called 45.50 as a key level to maintain. The Russel 2000 Index (IWM) is at 70.71. He said it would be a buy above 70.50. The S&P Depository Receipts (SPY) is at 135.47. 135 is the VWAP and 50 DMA. If it breaks 136, this could signify a right shoulder. The Financial select spider (XLF) is at 25.33. 24.40 is support. 25 was resistance. If this holds, perhaps we can see a breakthrough 26.20 to test the 50 DMA and down trend. Let's see if these levels can hold through the close.

Sources:
1. Seeking Alpha Intel Q1 2008 Earnings Call Transcript
2. Bank results soothe investors
3. Ten reasons to like U.S. equities: BlackRock
4. Trading & Investing Video Technical Analysis 4/15/08

Planet X / Nibiru / Dark Star

There's a lot of chatter that the singularity that will cause the end of history is a dark star with a solar system of it's own-- our Sun's binary sibling-- that comes close to Earth once every 2600 years or so. A simple Google search on Nibiru pulled up this website that offers an explanation. But I thought I'd embed two videos from Youtube, one, the first of a five part series describing the impending apocalypse and pointing us to a website where we can buy books and CDs to learn how to prepare ourselves for this world changing event. And another, by a skeptic and self-professed Debunker who discredits the producer of the first video, as well as other UFO and Nibiru proselytizers.

Dick and... Jane?

A picture of Dick Cheney on the White House website has convinced people that he was fooling around with a naked woman. Some saw her reflection in his sunglasses. Turns out it was just his hand on a fishing pole-- he was fly fishing. Check out the article in the LA Times. The comments are my favorite part. Here are a few:

• HEY, sometimes a bare hand DOES resemble a naked lady. [David]
  
• What naked lady in her right mind would get near him? Definitely his own hand. An old friend. hehe [mangowild]
• That's it! That's a mans hand in those glasses! I knew Cheney was gay. ;) [captainkona]
  
• It's perfectly obvious it's a reflection of his hand .... what is does reveal is apparently poor technique. The way his thumb is wrapped around the grip, it looks like he is choking it to death. Torturing it, even. On the plus side, woeful technique = safe (non-renditioned) trout. [Evilscribbler]
  
• If thats a naked woman..that probably isn't a fishing pole he's holding! [trshaw]
  
• Is that a zit on his nose reflected in his right lens, or do I see a nipple? [John]
  
• It's clearly a baby's arm holding an apple. So, the question arises, who is THAT? [lexicon ]
  
• Dick Cheney hasn't been that close to a naked woman in 40 years. [JC]
  
• Looks more like one of those high tech battery operated whips to me [Carlos Solis]
  

If there were 10, it could be a Letterman top ten list.

Barrons Blog

Apple's stock movement next week will depend on industry earnings reported (Intel on the 15th, IBM & Ebay on the 16th, Google on the 17th). If tech industry goes down, so does Apple. However, Intel could surprise and boost up the market. Also, Apple's Q2 earnings could be good, and investors could forgive the company's typically conservative estimates and bring the stock to 160 after earnings. If the Fed drops the funds rate another 50 bps, we could see another jump up at the end of the month. My guess is 165 or 170 if we're lucky. But that's a lot of ifs, and there are a lot of realistic comments in this thread, such as-- GE and UPS earnings scared people; AAPL could be at the top of a downward spiral, a la MOT; market failed 4th try to overcome resistance; CFO sold; advertisements galore; scarcity of iPhones means AAPL doesn't want to have excess inventory in a recession; what goes up on no news goes down on no news; tech's weak season; AAPL was only up due to 3G rumors-- all of these points make me want sell at a loss just to get out. I saw my money evaporate in a few days in January. I held calls that became worthless. Better safe than sorry. We'll see what next week brings.

Sources:
1. Apple Shares Sliding On Little News

Posted to Barron blog.

 

Apple: Getting Ready For March Quarter Earnings

One final note: AT&T (T) reports earnings one day before Apple; you will want to pay attention to anything they say on iPhone unit sales.

Projections

Last week Alcoa and UPS announced earnings that fell below analyst expectations and GE posted a decline in earnings. AMD announced layoffs and poor sales, and the S&P slipped to 1332.83.

However, for all the bad news, I believe there is still potential in technology. Alcoa, AMD, and UPS are not good measures for tech (although the case can be made for UPS deliveries of online purchases). Two weeks ago Oracle missed but RIMM beat profit expectations by nearly 15%, setting the tone for choppy Q1 earnings. I think we'll see a lot of up and down in this market, but overall, I hope (and here's where I worry) that AAPL will continue to be positive. I worry about hoping because I know that it's the worst thing to do in a market.

But I don't believe we will really know the effect broad-based earnings declines have on technology in general until Intel reports on the 15th, followed by IBM and Ebay on the 16th, and Google on the 17th. Only then can we really see where Apple will go.

It looks like if Apple does better than expected, but still warns for Q3, it may hold at 160 after earnings, but I don't expect to see a jump of more than 5% of whatever it is before earnings, mostly likely 145-150, if it compares to RIMM's price action after earnings. If next week is bad, I expect Apple to hold at 145 or so, but that may be wishful thinking. It could go below 140. Still, after options expiration on Friday, it could start going up again as traders place earnings bets, and even if it doesn't have much action after earnings, the Fed will most likely cut 50 bps at the end of the month and provide a boost to the market. I expect AAPL could reach 170 if we're lucky, or at least 165. So May calls are good if you can stomach the risk. However, give yourself the extra month and go into July.

I expect Intel to surprise us with good earnings, countering the AMD disappointment. I don't think we've seen the last of the good news in tech, although you should take you r profits for the summer soon after it happens. Buy back in September.

The opinions above are my own, based on Yahoo news, charts, and Bloomberg. Please do your own research.

Sources:
1. Bloomberg: U.S. Stocks Drop After General Electric's Surprise Profit Miss
2. Earnings.com: IBM
3. Earnings.com: INTC
4. Earnings.com: GOOG
5. Earnings.com: EBAY
6. Earnings.com: AAPL
7. Bloomberg: European Stocks Fall; STMicroelectronics, TomTom, Barratt Drop
8. U.S. Stocks Gain, Led by Retailers, Technology; Wal-Mart Rises
9. Research In Motion Gains as Forecasts Top Estimates (Update5)
10. SAP Shares Decline as Oracle Sales Miss Estimates (Update1)

Posted to Yahoo! AAPL message board.