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This chart says Icahn is wrong about Apple

Talking Numbers

Carl Icahn invested $3.6 billion in Apple, calling it a "no brainer". But, as the company reports earnings, are the charts saying it's more of a sell?

 

Apple is set to report earnings on Monday and no one is more eagerly awaiting the numbers than its number one fanboy, Carl Icahn.

While some diehard Apple devotees express their love by lining up for hours outside Apple stores whenever a new product is launched, Icahn buys up more and more shares of the tech giant. He now owns $3.6 billion worth of shares, or roughly 0.7% of the company, saying investing in the company is a "no-brainer".

And, like many other people who buy a lot of Apple, Icahn suffers from the malady that causes him to criticize the company and give new product suggestions. But, unlike his fellow sufferers, Icahn takes to Twitter to shout out his ideas rather than, say, posting as Carl1984 on the Apple sub-Reddit. The only difference, of course, is that Tim Cook might sometimes read Icahn's tweets even if he won't act on them.

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One can expect a few more tweets from Icahn on Monday as Apple releases its quarterly results. According to Thomson Reuters, 41 analysts expect December's quarterly revenues to come in between at 57.46 billion, about 5.4% higher than the previous year. But, that's the average; the $4 billion range is between $55.9 billion and $59.9 billion.

Meanwhile earnings per share are estimated at an average of $14.09 for 46 analysts. As with revenue estimates, the range for earnings isn't so narrow either, with $13.49 on the low end and $15.24 at the top. Last year's earnings were $13.81 per share.

CNBC contributor Gina Sanchez, founder of Chantico Global, notes that Apple gave guidance on operation margins of between 36.5% and 37.5%. According to Sanchez, that's the number to pay attention to.

"The problem with Apple is that their margins have been falling," says Sanchez. She believes that will change with this latest report. "I think that their margins, however, are going to improve a bit to the top end of their expectations."

For Sanchez, though, the real lure of the stock is its comparative valuation. "It continues to be cheap relative to other options you have in the market; 12.5 times P/E [price-to-earnings]", says Sanchez. "I don't say it's necessarily a 'no-brainer' but I will say it's cheap."

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Meanwhile, the charts are giving conflicting messages ahead of earnings, according to CNBC contributor Andrew Busch, editor and publisher of The Busch Update.

A long-term weekly chart has the 10-week moving average above the 30-week moving average. Using a moving average crossover strategy, that would be a buy signal, says Busch.

But, on a short-term daily chart, the signals are the opposite; the 10-day moving average is below the 30-day moving average, indicating a sell.

"As we're coming up to these really important earnings, we've got a price support point around $542.50," says Busch. "If those earnings stink or, more importantly, if… they actually hit their margins but the stock looks soft and it starts to drop, that's a big indicator it's going to continue to go down."

"Right now, I would say it's mixed," says Busch. "But, I'm looking to short Apple."

 

To see the rest of the discussion on Apple with Sanchez on the fundamentals and Busch on the technicals, watch the video above.

 

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