Apple's Run Ahead of Earnings; Stock May See $150 or $180 After News (AAPL, DELL, HPQ)

After today we’ll get to see earnings out of Apple (NASDAQ: APPL). The estimates for the computer and portable device giant from First Call are $1.07 EPS on $6.96 billion in revenues.  Next quarter estimates are $1.10 EPS on $7.16 million in revenues. Estimates for fiscal Sept-2008 are $5.16 EPS on $31.68 million in revenues.

If you wanted to describe the enthusiasm for Apple stock, it would be "on fire, again" as shares are literally up $40.00 since early March.  This stock has also gone well above its 200-day moving average now, which is now $152.19.

Interestingly enough, options traders appear to be pricing in a move of some $9.75 to $11.35 in either direction.  While this sounds like a big move, there are many days where the stock moves $6.00 to $8.00  up or down just on analyst commentary or on tertiary news.  For many reasons, we think the move might be an exaggerated move depending on the report and guidance.  Analysts have an average price target north of $195.00.

The issue we would focus on was Apple’s guidance it gave at the last earnings report.  Steve Jobs is known for being conservative, but it looked outright light on the last report.  We also weren’t as eager on the MacBook Air notebook at $1,800.00 for starters based on where the economy was heading, particularly as other PC makers are heading into the tablet and smaller "access devices" as well.  We’ll find out today if the trends in that direction are hurting Forrest Gump’s favorite fruit company or not.  iPod sales should also be a sideshow to iPhone sales and iMac sales. 

Just yesterday, we also noted how some trends are showing that Mac is finally heading further onto the desks at small businesses.  The recent sales trends from third party research also show the company gaining market share in total computer sales against Dell (NASDAQ: DELL) and Hewlett-Packard (NYSE: HPQ).  Dell looks like it was catching back up to H-P and passing it on some metrics, but the real ramp so far has come from Steve Jobs & Co. 

It’s not possible to predict technology stock reactions ahead of the news, but for many reasons outlined above it sure looks like all the enthusiasm and the recovery in many parts of the stock market could easily move Apple shares up or down by more than those options traders are bracing for.

Shares are up 2.6% today at $164.50 in late morning trading ahead of the numbers.  Apple’s 52-week trading range is $91.30 to $202.96, so neither $180 nor $150 would be way out of the norm.

Jon C. Ogg
April 23, 2008

Jon Ogg is a producer of and editor for both the Special Situations newsletter and the "10 Stocks Under $10" weekly newsletter for 247WallSt.com; he can be reached at [email protected] and he does not own securities in the companies he covers.