This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Make Money on Apple Analysts' Indecision

Stocks in this article: AAPL SSNLF GOOG

NEW YORK (TheStreet) -- There's no denying that shares of Apple (AAPL) have been in a funk recently. Sounds like time to take advantage.

The stock ended Wednesday's session at $519.01, down more than 4% since the beginning of April. Before this decline, shares had climbed 5% since the end of February.

Apple will report fiscal second-quarter earnings results on April 23. The stock's recent volatility underscores how torn analysts are on what Apple is likely to report.

On the one hand, you have bulls like Andy Hargreaves of Pacific Crest, who believes Apple will beat earnings. Wednesday, Hargreaves reiterated his outperform rating on the stock and his $635 price target. From current levels, this suggest an upside of 22%.

Then there is Toni Sacconaghi of Bernstein Research, who believes there's more downside risk to these shares, even though the stock is off more than 26% from its all-time high of $705. And aside from warning about possible weakness in next week's report, Sacconaghi believes Apple will also disappoint investors in the July quarter.

Regardless of which analyst you want to believe, what remains clear is that Apple's worst days are over. And this stock is a definite buy ahead of the next week's earnings results. I say this knowing full well that Apple stock has had a tendency to fall following recent results. But my suspicions tell me this time will be different.

Consider this. For as much criticism Apple has received for its perceived poor results, the company has matched or beaten its own guidance for the past three quarters. In fact, during that span, Apple has surpassed its midpoint range for both earnings-per-share and revenue.

While detractors blame CEO Tim Cook for "missing" the mark and lament his purported inability to lead, it has been analysts (not Apple) that have missed on expectations. There is a significant difference.

Next week, the Street will be looking for $10.15 in earnings per share on revenue of $43.55 billion. Bears are already complaining the implications. Although $43.55 billion would be a 24% sequential decline from the $57.6 billion Apple posted in the January quarter, one shouldn't discount the effect of the strong holiday season that boosted last quarter's sales.

Likewise, analysts will harp on the device sales. Given concerns about growing competition from Samsung (SSNLF) and Google (GOOG), the Street will want some confirmation that Apple is able to maintain both its market share and strong margins.

To that end, 40 million is the key figure in terms of iPhone unit sales, down from the 51 million Apple sold in the January quarter, but 3% higher than Sacconaghi's estimates of 38.8 million. But assuming that Apple does not top the magical 40 million mark, analysts will do an injustice to investors if they fail to highlight the impact of Apple's strong margins.

Samsung spent $14 billion on advertising in 2013, or $13 billion more than Apple spent. Samsung's profits have been on the decline. Yet analysts drool over Samsung's market-share position. But is that really the point of investing? Market share absent strong profits don't support dividends and stock buybacks.

Assuming that Apple can maintain its profit margin of 37%, Tim Cook is certain to reward shareholders with more aggressive dividends and/or buyback announcement during the conference call. Margins that expand to 38% would be enough to trump any concerns analysts might bring up about the July quarter.

Considering their tendency to out-think themselves, it looks like time for investors to be decisive.

At the time of publication, the author was long AAPL and held no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

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