Apple Inc. (AAPL) is on deck to report earnings this afternoon after the closing bell. Today’s report is likely to have a much wider look than just earnings because of Apple’s upcoming iSlate tablet launch and the potential opening of distributors and wireless carriers on the iPhone.
Thomson Reuters has estimates pegged at $2.07 EPS (non-GAAP) and revenues of $12.06 billion. Just keep in mind that estimates were not significantly raised throughout the quarter, and there are whispers out there of $2.25 EPS. In fact, the top analyst target is $2.27 EPS, so some might even be hoping for more than this. Apple usually offers some guidance. Thomson Reuters has a non-GAAP estimate of $1.77 EPS and $10.37 billion in revenues for the current quarter. And for a fiscal September 2010, the estimates are $7.91 EPS and $45.24 billion in revenue.
Last quarter Apple’s CFO gave guidance, “Looking ahead to the first fiscal quarter of 2010, we expect revenue in the range of about $11.3 billion to $11.6 billion, and we expect diluted earnings per share in the range of about $1.70 to $1.78.” Last quarter Apple ended with a combined liquidity of over $23.46 billion in cash and short-term investments and another $10.5 billion in long-term marketable securities. The company noted that gross margin was 36.6%, up from 34.7% a year earlier, and noted that international sales were 46% of the quarter’s revenue.
The analysts did raise their price targets throughout the quarter. Thomson Reuters has the average target now closer to $240.00 and a top target of $280.00. Jim Cramer in his mobile web tech tsunami predictions even went out with an “Apple goes to $300” thesis. Margins are expected around 36.4% tonight.
Apple’s chart is not as solid as it once was. After entering a technical no-man’s land in December, we have seen a run back to the $210-$215 area, but shares closed under $200 on Friday with the sell-off and are now back up around $202.50 in late-morning trading. The 20-day moving average is $209.66 and the 50-day moving average is $203.25, which can be indicative of more upside resistance. Some classic chart watchers might point to the right side of a head and shoulders pattern, although it has to be said that the same pattern was evident in May around $130, June around $140 and August around $165. It should also be noted that Apple spent a longer period in a sideways chart pattern at its peak before earnings from June to July than it has in the period seen so far this month.
The options activity is interesting. If you look at the PUT and CALL data for FEB-2010 expiration, there have been more than 40,000 contracts traded in the closest in-the-money and then in the active out-of-the-money puts. The same review in the active in-the-money and out-of-the-money calls that figure is closer to 45,000. That signals we are not just seeing a bias of earnings bets to the upside as we usually see. If you tally up the open interest, that still has more upside betting in total. There is still effectively four full weeks of time value in these options, but using the pricing from late this morning it seems as though options traders are braced for a move of up to $11 to $13 in either direction.
What everyone is likely to focus on outside of margins and how much the company beats earnings is the upcoming launch of the iSlate. This tablet is supposed to be very large for a next product introduction. That is part of why the company is already just on a consensus basis from Thomson Reuters is expected to show 2011 earnings growth of 21% (to $9.62 EPS) and 2011 revenue growth of 17% (to $52.99 billion).
Another action that many forget about is how much the Apps Store will generate in 2010 to 2011 and beyond. This is effectively free incremental income to the company that builds higher and higher brand loyalty for the iPhone, the iTouch and ultimately for the coming iSlate.
There is one last issue, and it is hard to know if this will be addressed today or if it will be addressed at this week’s product launch. For that matter, it is possible that the company will not even address this at all. But there are significant rumors out there on the notion that the iPhone will no longer be limited just to AT&T (T) as Verizon (VZ) “may” get to launch the iPhone and may even become a distributor of the iSlate tablet.
Apple will obviously be the stock to watch in after-hours trading.
