Apple's 'Conservative Guidance' May Mean More Than Past Quarters (AAPL)

Apple Inc. (NASDAQ: AAPL) is set to report earnings after the market closes today.  This is actually just the first quarter for its fiscal 2008, but this is also the quarter with the Christmas season and the company may have some insight for what is on the immediate horizon.  Q1 estimates out of First Call are $1.62 EPS on revenues of $9.47 Billion.  Next quarter estimates are $1.09 EPS on $6.98 Billion in revenues.  If Apple offers its fiscal September 2008 guidance, First Call has estimates at $5.14 EPS on $31.8 Billion in revenues.

Shares have recovered handily off of the pre-market and post open lows today, but its shares are still off about 25% of the end of December highs.  While the wild bull run is no longer in a solid up-trend, the 200 day moving average is still around $144.28. Analysts are still positive on the stock with average price targets well north of $200.00 ($214+).  The options are going to be hard to use as a predicting tool because the VIX has risen so much as the market tanked, but it appears that options traders have essentially prepared for a move of up to $15.00 in either direction today.  That is up to nearly a 10% price change based on today’s prices.

What is interesting is how much the market has changed over the last few weeks since Apple became a permanent bull stock.  In the past Steve Jobs has always blown away earnings and then tended to give conservative guidance, and Wall Street assumed the posture of "wink-wink, nod-nod" that this meant the numbers would be far better than that.  But right now the markets are spooked and frankly anything resembling the "efficient market theory" has been thrown out the window.  The investment community will probably be trying to garner how Steve Jobs really sees the environment in a consumer spending environment that has rapidly deteriorated.

We aren’t calling an outright end to the Apple phenomenon because their product cycle is still running, it seems to defy spending concerns, and analysts defend this one on nearly every chance they get.  Macworld is only a week old now and we are only a week or so from the Mac Air notebook hitting the shelves.  But Wall Street wanted something closer to 5 million iPhones sold rather the 4+ million noted last week.  This company has deviated away from being iPod or only Mac-dependent in its numbers now.  We’ve had a new O/S and a new product last week, and now this is becoming more of a series of moving parts rather than a single product or even two product focused company.

Jon C. Ogg
January 22, 2008