Apple Earnings Preview (AAPL)

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Apple Inc. (NASDAQ:AAPL) reports earnings today after the close and Wall Street is expecting $0.86 EPS and $6.07 Billion in revenues.  The company’s guidance usually comes at or under certain targets and is deemed overly conservative.  The estimates for next quarter are $1.39 EPS and $8.6 Billion in revenues.  If you have been inside an Apple store you’ll know why everyone expects a blowout quarter.

Apple shares were indicated higher by about 0.7% pre-market, despite the sell off seen in overseas markets and in U.S. futures this morning.  After the open, shares are now up almost 1.5% at $172.90.  Apple shares closed down $3.08 on Friday to $170.42, which was better than the overall market fared.  Shares did hit new intraday highs of $174.63 on Friday.

Since shares were hitting new highs on Friday, you can imagine what the chart says.  During the August market malaise Apple shares closed as low as $117.05, so shares are up over 40% from those levels.  Options do not expire until November 16 after Friday’s expiration, but it appears that option traders are expecting a move of up to a $12.00 to $13.50 range in either direction today.  Speculators are obviously using options as a "cheaper" way of trading the stock, because there are over 100,000 contracts listed in the open interest in the closest strike prices for November.

We just noted this morning how Strategy Analytics was predicting that Apple and AT&T would deliver 1.1 million iPhones in Q3, bringing sales to 1.325 million units.  You have to wonder when Steve Jobs is going to split this stock.  As a reminder, we are less than 5-days out from its new Mac OS X Leopard launch as well.

We recently covered how Apple was growing its worldwide computer shipments, and Gartner said that last quarter’s Mac shipments rise 37% to roughly 1.3 million units.  If that is accurate, Apple’s computer market share is now 8.1%.  Apple was also listed as one of our key window dressing stocks and Jim Cramer has it as one of his "New Four Horsemen of Tech," although recently he noted how some of these may see some expected profit taking.

Jon C. Ogg
October 22, 2007