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Apple (AAPL) is the most followed company on earth. There are more analysts covering Apple -- and all things Apple -- than there are stocks (that was a joke).

What I want to say is that the market knows what Apple's numbers are going to be tonight. It does not need tonight's conference call to be enlightened. And while management's outlook is a big help in forecasting the future, so much is known about Apple that analysts and the market have more than enough clues to go on, it actually does not even need management's enlightenment.

So according to analyst estimates, Apple will probably make about $10 a share in after tax profits for the current quarter. And while indeed estimates have been coming down for several months, what is important to note is that analysts expect next year this time around even bigger earnings.

For the current year ending September 13, analysts expect Apple to make almost $44 per share. However, analysts expect Apple to make almost $50 a share in after tax profits for the year ending September 14, 2014.

As you can see, analysts are forecasting increased profits next year and not less. So why is the stock tanking, are analysts wrong? I don't think so. Analysts might be just a bit slightly optimistic, but I think they are correct. And unless something cataclysmic happens by next year, analyst estimates will be very close to what Apple will earn.

So the question is, why is Apple's stocks trading so much on the cheap? Why is Apple trading like:

  • A stock that is forecasting lower forward earnings

  • A company that has liquidity problems

  • A company that has a broken business model

I for one am not satisfied with the answers we get from most pundits. Yes Apple faces tough competition from Google's (GOOG) Android Platform and Samsung (OTC:SSNLF) has taken the world by storm, but that has not put a dent (so far) in Apple's brand.

Yes the smartphone space is becoming saturated and growth will stall, but that does not mean that people will stop buying smartphones.

While Apple has not produced any new revolutionary products as of late, it does not mean that Apple has lost its touch or that it is not a groundbreaking company anymore. Apple has been in the forefront of the computer revolution from day one and I am sure we will see even more surprises from it in the future.

Above all Apple is a bargain compared to the competition any way you slice it and dice it. How many companies can you find trading so cheap, with no debt, cash coming in day and night and with a brand that is almost as known as McDonald's (MCD)? So why is the stock trading on the cheap? I have written many theories on that in the past (please consider: Several Theories To Explain Apple's Nosedive).

My guess is that it has to do with the over-exposure and wild speculation in the stock over the past several years. I am sure there have been many hedge funds hurt by Apple and that many asset managers have sworn never to buy Apple's stock ever again. I am also sure that many high margin players have lost tons of money in Apple, and I am sure many more have had more margin calls than they want to remember.

Microsoft (MSFT) was in a similar situation many years ago. However, in contrast to Apple, Microsoft was a bubble of mythical proportions in late 2000. In addition to cleansing the excess speculation and the over-exposure, the fundamentals of Microsoft had to catch up to the stock's price. In fact it's the first time that I can ever remember that Microsoft is actually a fairly good priced stock.

Apple however is not expensive and as such the fundamentals do not have to catch up to the stock's price. Apple's stock simply needs to purge the speculation and the hype, and wash everyone out of the stock who thought they would become rich overnight. And until the market teaches all those a lesson, Apple's stock (in my opinion) will probably not rally from here, even if it deserves to do so.

And like I have said in previous articles, one of the ways for the market to cleanse itself is via some kind of a mass sell-off, where everyone throws in the towel and gives up on the stock.

Bottom line

Since there is nothing that the market does not already know about Apple, and since there is nothing that Apple's management can say tonight that will enlighten investors, I think there is also nothing that can make investors bid-button happy to buy Apple's stock. As such, whatever Apple's management says tonight, I think we will see a sell-off.

Source: Heads: Apple Short Sellers Win, Tails: Apple Shareholders Lose