Apple Inc. (NASDAQ: AAPL) is set to report earnings after the closing bell today.  As always, this is one of the tech market’s biggest events, but there is a problem… traders, investors, and analysts are getting rosier and rosier expectations based upon how earnings season is progressing despite the recession.  This report canm of coursem affect much of the tech sector, but it will likely have rub off immediately in shares of Research in Motion Ltd. (NASDAQ: RIMM) and in Palm Inc. (NASDAQ: PALM).

Thomson Reuters has consensus estimates listed as $1.17  EPS and $8.20 billion in revenues.  This is ahead of its last guidance of $0.95 to $1.00 EPS and $7.7 billion to $7.9 billion in revenues, and whisper numbers have climbed higher and higher.  These official consensus estimates have increased over the last 3 months, but estimates have been above the company’s target the entire quarter.  For next quarter, we have consensus estimates pegged at $1.30 EPS and $9.09 billion.  Next quarter is also its fiscal year-end.

We have been trying to compile some rough estimates on their individual metrics.  We are expecting more than 4.5 million iPhones for the quarter, and somewhere north of 9.5 million iPods.  The sales of various Mac computers is something we have penned in as 2.5 million.  Be advised that these are not official numbers.

• To compare these estimates, here were last quarter’s numbers: 2.22 million Mac computers, 3% decline from the year-ago quarter; 11.01 million iPods, 3% growth over the year-ago quarter; iPhone 3.79 million, a 123% growth over the year-ago quarter.

As far as margins are concerned, we are looking for 33% on the low-end and might expect upside north of 34% or 35% as a baseline number.

There are two wild card issues we are almost reluctant to mention.  The first notion is that many expect Steve Jobs to be more present on this call than in any prior calls. The second wild card notion is the late-quarter boost that the iTunes store received in the last week of the quarter from sales of Michael Jackson music.  We do not put much credence in this being any material event because one artist’s sales, even a dead legend causing a boost in sales, is unlikely to mount much difference when a company is expected to post $8+ billion in sales for the quarter.

Besides the small pullback today, this stock has run up from $120 to north of $150 in the last 3-month period, and shares are up from under $90 during the March lows when panic selling ruled the roost.  That being said, had today been an up-day we would have pointed out a severe buyer exhaustion.  That still looks to be the case.  Its 52-week trading range is $78.20 to $180.45.

Options traders appear to be braced for a move of $6.00 to $7.50 on a snapshot basis.  As far as the analyst group, we have an average target getting much closer to $160 now.  We would not be surprised if the directional move is much higher than that.

While everything points to a stock in need of a breather, Apple has been too “under-promise and over-deliver” to call anything out ahead of time with 100% certainty.

JON C. OGG
JULY 21, 2009

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