Previewing Apple: Earnings & Potential Stock Split

After Wednesday’s close we’ll get to seehow Apple’s quarter turned out, but more importantly we’ll get a firstlook at the guidance ahead that includes the previously unincludednumbers for the Apple set-top box for television and the Apple Phone.We have not heard any forecasts on these devices, and analysts haveonly started raising longer-term estimates and targets after these wereunveiled at MacWorld.

The Banc of America analyst, Keith Bachman, is a 5-star ratedanalyst with Starmine and he recently reiterated his Buy rating andlifted his $100 target to $110 after the new products were unveiled.The street is looking for estimates of $0.78, but the StarmineSmartEstimate(R) is for $0.81.  The higher-end of the range is $0.83.Revenue expectations from Wall Street are roughly $6.43 Billion.  Thecompany only guided $0.70 to $0.73 and $6.0 to $6.2 Billion impliedwith its last earnings when it gave guidance.

Apple’s chart shows an overbought reading, but that is frequentlythe case and almost every sell-off in Apple shares has been met with abuying flurry and a surge to newer and higher all-time highs.  On anadjusted basis, Apple is up more than TENFOLD since October 2001 whenWindows XP was released and when the economy was choking on the impactfrom 9/11.  Shares are also up huge from last earnings when its shareswent out at $74.29 ahead of earnings.

The real impact from new products is actually two and three quartersaway, so there is a lot of calendar between now and the forwardguidance.  Any supply hiccups or any real changes in the componentmarkets could speed up or delay the launches, and many research firmswill have to try factoring that variable into estimates.  As of one-dayout, Options traders appear braced for a move of up to $4.00 in eitherdirection; but that "expectation from options pricing" should compressrapidly after tomorrow’s results come out and as the time value left onthe options will erode in the last 48 hours until Friday’s optionsexpiration date.

We’ll likely see the formal restatement from 2004 to 2006 for theaccounting charges from options expensing, and you can expect that manymedia reports will still be focusing on Steve Jobs and the potentialoptions scandal.  Also, with the stock close to $100.00 you can justassume that this is on STOCK SPLIT watch.

Jon C. Ogg
January 16, 2007