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TheStreet Open House

Apple Is Poised to Move Even Higher After Reporting 3Q Earnings

Stocks in this article: AAPLIBMGOOGL

NEW YORK (TheStreet) -- We don't generally trade prior to earnings but both technical and fundamental factors are suggesting a long play on Apple  (AAPL) prior to the earnings announcement later Tuesday.

Wall Street has been riding high on AAPL for some time now and expects it to report $1.22 per share in earnings for for its fiscal third quarter, an increase of over 10% year over year. So the company is making money.

What else is new? From a fundamental perspective, the breaking news is Apple's recent deal with IBM  (IBM). These long-time competitors are now teaming up to ride the tablet and app wave. According to Forrester Research, business and governments (i.e. enterprise) spent approximately $11 billion on iPads alone in 2013.

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This is a significant amount for any industry but only accounts for a small portion (about a third) of the Cupertino, Calif., giant's total iPad sales. Furthermore, the $11 billion number is expected to increase by 20% over the next two years.

The objective here is to get more users into the Apple ecosystem, which is the holy grail of the triple-play gods -- computer, tablet, phone. Getting more users in the enterprise space to function with iPads will invariably cause more demand for complementary products such as iPhones, Macs and associated apps, music services. The list goes on.

The deal with IBM clearly allows Apple to gain a stronger foothold in the enterprise space. A secondary and, sometimes overlooked benefit, is that they are now in business with the company that is the gold standard in enterprise and they did it before Google (GOOGL) could maneuver into that space with its Android offerings. The consumer space for iphone and other i-products is getting saturated but the enterprise space is still fertile ground. Thus, with Apple showing signs of growth even in the relatively sleepy consumer space, its outlook only looks better over the next 6 - 12 months as it rolls out its initiatives in the enterprise space.

On June 9, Apple's stock started trading post 7-1 split. Even though the company's stock isn't really any cheaper based on the way Wall Street analysts value stocks, the stock is undoubtedly more affordable. Shares recently traded at $94.34, up nearly 18% for the year to date.

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