Breakout

Apple Earnings Preview: Another Upside Surprise?

Jeff Macke
Breakout

Apple (AAPL) reports quarterly earnings results tomorrow and the market is expressing serious jitters prior to the release. The stock is up 40% year-to-date but down 6% for April and nearly 10% since hitting all-time highs a scant two weeks ago. The official estimates are for earnings of $9.95 on just north of $36billion in revenue.

"It's not going to be about the new iPad and it's not going to be about the the iPhone 4S," says Jon Najarian, co-founder of TradeMonster.com. "I think it's going to about Mac sales and the outlook going forward."

Ah, yes, the Mac. Lost in the storm surrounding the "Newest Biggest Thing" is that there hasn't been a refresh on Mac products in over a year. Mac accounts for roughly 15% of Apple revenues; not enough to really sink the ship on the margin, but certainly a factor to be considered in light of the moribund growth of the traditional computer industry as a whole.

A slimmer form factor, new chip set, or a refresh in general for the Mac would be more than welcome news to analysts and investors.

While not expecting anything along the lines of an iPhone5 or firm "iTV" plan, Najarian notes that Apple has done a lot for shareholders this year. The company rolled out a highly successful iPad update, issued its first ever dividend and, of course, gave dedicated shareholders the aforementioned greater than 40% gain in shares.

Despite the surge, the stock is running out of steam fast. Whether the trading marks just another buying opportunity or something greater, the selling volumes have been high. As of Monday morning Apple is sitting atop its moving average at about $570. A break below that level hasn't been see since last December.

Najarian says the bulls are about to get some good some ammo to shoot against the bears. He wonders not if Apple can top estimates, only "how big the best will be." With EPS of $9.95 as the base case he "wouldn't be surprised to hear a $10.50 or $11.00 number. I think it could be that big."

Nervous shareholders better hope he's right. Those waiting to buy a big Apple miss will likely get their shot, should Najarian be off the mark.

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