Lion's AppleWatch

AAPL Earnings Preview

Apple Inc (AAPL : 209.45, -0.22) is expected to release its first quarter of fiscal year 2010 earnings on Monday, January 25, 2010.

In the last four quarters ending September 2009, the consumer tech firm has continued its good run of beating the market's consensus by double digit margins.

Analysts' estimates for the quarter ending December 2009 range from a low of $1.709 to a high of $2.27, compared to a consensus estimate of $2.044. According to Thomson Financial, for the fiscal quarter ending December 2009, the consensus EPS forecast has increased over the past week from $2.043 to $2.044 (0.05%) and increased over the past month from $2.036 to $2.044 (0.39%). Of the 37 analysts making quarterly forecasts, 5 raised and none lowered their forecast.

Since 2001, Apple's first quarter revenues have been showing an increasing trend year after year. There is no reason to expect the trend to wean out.

Big holiday season sales have been contributing to the continuance of the trend. However, on October 18, 2009, the company issued guidance in the range of about $11.3-$11.6 billion and diluted earnings per share (EPS) in the range of about $1.70-$1.78.

I agree with the analysts' consensus estimates that the company will beat its guidance. The reason being, the company's key business units and products are likely to come in higher than the company's guidance estimates. However, the results would be affected by legal expenses especially those related to judgments on patent infringement rights.

Towards the end of December quarter, Apple acquired La La Media Inc, a Palo Alto-based provider of online music streaming services. Since 2001, Apple's yearly revenues have been showing an increasing trend.

There is no reason to expect the trend to wean out. For the fiscal year ending September 2010, the consensus EPS forecast has increased over the past week from $7.833 to $7.840 (0.09%) and increased over the past month from $7.788 to $7.840 (0.67%).

Of the 44 analysts making yearly forecasts, 5 raised and none lowered their forecast.

Apple's decision to enter television subscription via the internet might boost the company's long term growth rates. Currently, Apple's share price is trading at $210.11 compared to the 52 week range of $78.20 and $215.59.

In the last one year, the stock has more than doubled. Though the stock is not expected to continue its stellar growth nevertheless it is expected to continue growth in high double digit territory. Currently it is trading at a PE multiple of 33.42 and I expect the stock to trade in 27 to 32 PE multiples in the next few quarters. 5:00:46 PM

Last update: 2/2/10; 1:43:24 PM

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