Apple Earnings Preview: Despite Growth, Some Issues Overhanging

Apple Inc. (NASDAQ: AAPL) is set to report earnings after the close on Tuesday. With a great sell-through in iPads but a weaker iPhone demand ahead of the upcoming iPhone 5, everyone is looking for guidance, and it could boil down to the computer sales being the ultimate driver today. Of course, you better be looking for any hint and projection around the Apple television release.

We would make one note of caution: Apple has significant currency risks now that almost two-thirds of its business is outside of the United States. Another note of caution should be taken from what has happened with analyst earnings expectations. These estimates have not grown much from 60-days ago, and the estimate is actually down from a week ago, according to the Thomson Reuters summary data.

Here is a Bloomberg analyst report on how the iPhone 5 is taking a bite out of Apple’s growth currently. What makes Apple so interesting is that Apple is still not at all representative of the broader market and it is not even representative of the technology sector.  Dell Inc. (NASDAQ: DELL) and Hewlett-Packard Co. (NYSE: HPQ) are struggling while Apple is still growing and expanding.

We already saw sell-through data from AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ), and we know that Apple and Google Inc. (NASDAQ: GOOG) are collectively putting Nokia Corp. (NYSE: NOK) and Research In Motion Ltd. (NASDAQ: RIMM) in the poor house.

With shares around $606, the consensus analyst target price is above $724 and the 52-week range is $353.02 to $644.00. Thomson Reuters has estimates of $10.36 per share and $37.18 billion in revenue. Here are some additional points to consider:

• Options traders are calling for a move of more than $15 in either direction, if you look at the near-month puts and calls.
• The chart has been following a trading range pattern while the broader market just cannot decide its fate. The 50-day moving average is way down at $580.33, and near-term resistance has been up between $615 and $620 over the past two-weeks.
• According to WhisperNumber.com: The whisper number is $11.02, sixty-seven cents ahead of the analysts estimates. Over the past twenty-three quarters the whisper number has been closer to the actual earnings (than analysts estimates) in 21 of 23 quarters.

Here were Apple’s sales per unit and other select data last quarter:

• 35.1 million iPhones (up 88%)
• 11.8 million iPads (up 151%)
• 4 million Macs (up 7%)
• 7.7 million iPods (down 15%)
• Apple’s prior low-ball guidance: revenue of about $34 billion and $8.68 EPS
• Gross margin last quarter: 47.4% versus 41.4% previously
• International sales were 64% of revenues last quarter.

JON C. OGG