Apple (AAPL) is not the best stock. Google (GOOG) is. Or, maybe it is a tie.
Apple will release its earnings into the jaws of one of the great economic slowdowns in memory and analysts think it EPS will rise to $1.11 from $1.01 last year. Some forecasters even put their quarterly guess as high as $1.19. Revenue is expected to go up 29% to $8.05 billion.
By those measures, the stock is dirt cheap, trading at just above $98, down from a 52-week high of $202.96.
Of course, investors are probably not worried so much about this quarter as the next quarter of this year and 2009. Since Apple’s CFO always sandbags his forecasts, listening to him is close to worthless.
The Apple magic is based on one simple premise. Consumers like Apple products much better than competing offerings. That allows Apple to command premium prices. It also means that if people are going to buy any computer, music player, or phone, it will be an Apple. Buying something from Steve Jobs is such a privilege that consumers will spend their last dollar on something he has made. Recession or not.
To think that a company could command its markets that way is nearly absurd, but it has worked for Apple because consumers prize its products above others. No one understands how to use a Mac. It is much too complex and has nothing like the ease of use that a PC running Microsoft (MSFT) Windows does. But, people cannot get enough of the Apple product even though it is sold at a premium to almost every other laptop and desktop.
The same is true of the iPhone which looks like a brick with a touch screen. But, it does not have tiny and useless buttons on a keyboard like so many other cellphones do. Its screen is large and bright. The fact that it does not work on the AT&T (T) 3G network is only a modest drawback.
Whatever analysts and skeptical consumers think of Apple products, their appeal compared to their competition is remarkable and has been sustained over time.
As a business, Apple has the one thing that every other company would love–staying power.
Earnings will be better than expected.
Douglas A. McIntyre
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