THE APPLE INVESTOR: What You Need To Know Ahead Of Earnings Tonight

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Apple Reports Results Tonight After The Close (Business Insider)
All eyes are on the consumer technology and media giant as it reports March Quarter earnings after the close at 5:00pm ET / 2:00pm PT. Most signs point to another strong quarter, with Apple’s iPhone and Mac leading the way. Investors will no doubt be looking for guidance on the new iPad business. Join SAI at 4:00 pm ET for real-time analysis.
 
AAPL Selling Off Ahead Of Earnings
Shares of Apple are slipping today ahead of earnings. The stock is off about $2 at $245 or 18x estimated fiscal-year 2010 EPS and 20x Enterprise Value / Trailing Twelve Months Free Cash Flow. Expectations are high and there’s the risk that the stock will see even more weakness tomorrow if earnings are not good enough (a la Google). Upcoming catalysts include the domestic 3G iPad ship date (May 7); international release of the iPad (May 10); and the launch of the next generation iPhone (this summer).

Analysts Issue Last Minute Comments On The Quarter, Bullish As Always
NPD released its March consumer technology report, giving analysts a proxy on quarterly sales units. The data does not, however, include international sales.

  • Credit Suisse analyst Bill Shope: NPD data indicated that Apple Mac units slowed to 9.0% growth in March, pointing to growth of about 25.9% for the March quarter. Shope attributes the slowing to “a spending pause ahead of the Macbook Pro refresh and iPad launch this month.” International Mac sales should push growth to over 30% (Shope is looking for 35% growth). Apple is his favourite stock in the hardware sector.
  • Piper Jaffray’s Gene Munster estimates that Apple sold between 2.8 and 2.9 million computers in its second fiscal quarter (March). According to NPD, iPod sales were up 3% year over year for the quarter. Including international sales, Munster estimates that Apple shipped 9 to 10 million iPods in its second quarter. He maintains his Overweight rating and $299 price-target.

More Analysts Pound The Table On Apple (CNBC Video)
In a preamble to Apple earnings, CNBC’s Fast Money 360 interviewed several experts. Canaccord Adams analyst Peter Misek is bullish and recommends buying the stock going into earnings. Misek believes the Mac business did very well and iPhones continued to outperform (and will continue with that momentum as the new iPhone is released this summer). Technical analyst John Roque of WJB Capital is also bullish, however thinks the stock is a little expensive at these levels. Brian Stutland of Stutland Equities is a buyer of a 240 to 260 call spread (purchasing 240 call options while selling the 260 call options) to capture upside without plunking down a ton of cash to do so.

What Apple Will Likely Report Using Historical Outperformance As A Proxy (Business Insider)
Apple is known for dramatically low-balling its profit guidance, and then miraculously blowing out “expectations.” Since Sept. 2006, Apple has topped its quarterly EPS guidance by an average 39%, and its revenue guidance by an average 7%. Apple significantly changed its accounting practices last quarter, but in running the old formula, history suggests Apple should report EPS of about $2.95 on $11.98 billion of revenue. Wall Street expects lower earnings but even higher revenue (a margin hit): Consensus stands at $2.44 in EPS on $12.06 billion of revenue. So Apple is set up to once again “surprise” on earnings, but, possibly, disappoint on revenue.

Thank You Drunk Apple Guy, Now We Know What To Expect For The Next Gen iPhone (Gizmodo)
If you need a new iPhone, you should probably do everything you can to hold out for this summer’s next generation. Gizmodo got it’s hands on the coveted new Apple gadget and the features are completely new and different. A few important additions and changes: front-facing video chat camera with an improved back camera with a flash, improved display, secondary mic for noise cancellation, and the phone is slightly smaller than 3G but heavier with a better battery. See pictures of the new iPhone here.

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