This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Apple Earnings: The Mother of All Reports (Update 2)

With Apple refreshing its entire product line in a little under two months towards the end of 2012, CEO Tim Cook warned that gross margins would go down, then move back up through the rest of the year.

J.P. Morgan analyst Mark Moskowitz believes Apple can achieve 39.3% in gross margins this quarter, which would bode well for earnings. "For Apple, we believe much of investor anxiety has been related to the potential movement of gross margin over time," he wrote, in a note. "As discussed previously, if Apple is able to improve corporate gross margin closer to the 40% threshold, then we believe the Apple story can come back into favor. Our gross margin estimates for Dec-Q and F2013 are now 39.3% and 40.6%, versus 38.7% and 40.3% previously."

Moskowitz rates Apple "overweight" with a $725 price target.

Margins really are the key to the report, as well as forward guidance, said one hedge fund analyst who declined to be named. "If they guide weak on margins, no EPS number will be good enough because everyone is so worried about the future that the recent past loses its relevance."

Capital Advisors Growth Fund portfolio manager Channing Smith has his concerns over Apple, particularly regarding gross margins. "We expect overall gross margins to come in slightly under 40% and the coming quarters gross margins to trend to the low 40% range," Smith said in an email. He believes Apple could sell 50 million iPhones and 22 million iPads in its fiscal first quarter, but does have some concerns about Apple. "We are for the first time in years somewhat nervous about the report as there were uncertainties out there during the quarter that are hard to handicap," he said.

Forward guidance, always a curveball with Apple, will be more heavily scrutinized this quarter than most. Apple tends to under-promise and over-deliver (UPOD) on guidance, so its outlook should always be taken with a grain of salt. BMO Capital Markets analyst Keith Bachman believes guidance could be disappointing, with Apple guiding sales between $40 billion and $42 billion for the March quarter. "In years past, investors have bought disappointing guidance and usually have been rewarded over time. However, with such negative sentiment surrounding the stock, we do not think investors will use conservative guidance to buy the stock in the near term," Bachman wrote, in his note.

As long as Apple comes in close to the Wall Street consensus, this could very well alleviate concerns about the company, for at least a little while. Analysts polled by Thomson Reuters are looking for $45.38 billion in sales, earning $11.67 a share for the March quarter.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $126.87 0.36%
QCOM $71.51 0.82%
T $33.49 -1.50%
VZ $48.30 -1.30%
FB $80.01 -1.50%

Markets

DOW 17,856.78 -278.94 -1.54%
S&P 500 2,071.26 -29.78 -1.42%
NASDAQ 4,927.37 -55.4390 -1.11%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs