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Tomorrow is a day on the calendar that Apple (NASDAQ:AAPL) shareholders have circled due to the fact that it is quarterly earnings day for the giant from Cupertino. Investors will get a more detailed look on how earnings/revenues came in for the quarter, clues on demand for the iPhone & iPad as well as guidance for the next quarter. Even though the stock has behaved pretty well since bottoming in late June under $400 a share in the "tapering" triggered decline of May/June and the shares stand at just under $430 a share before earnings tomorrow.

Where We Stand:

There are about as many analyst opinions on the outlook for Apple as how to best pick your fantasy football team for the upcoming season. BMO Capital came out with comments today that best captures how I feel about the stock currently. Analyst Keith Bachman bumped his price target from $450 to $480 a share predicting "the company will beat revenue, margin, and EPS expectations, but disappoint on guidance." Given consensus earnings estimates for the quarter have come down some 20% over the past three months and guidance is likely to be conservative given the challenges in the smartphone market, I think this take is a likely outcome.

What To Watch:

There are likely to be no major announcements or major clues to new major product launches or any changes to current capital allocation programs (dividend hikes, stock repurchase authorization). Other than earnings and revenue results, here is what I will be listening for in the conference call:

  • How the company answers the inevitable questions about larger iPhones & iPads. Speculation about both seem to be ripe and it appears there is evidence the company is moving in that direction. I think management's "body language" to these conference call inquiries will be important to ascertain a shift in management sentiment that should be positive for the stock.
  • How much stock did the company buy back in the quarter with its recently announced $60B stock authorization program? This is a major support for the stock and I think the number of shares removed from float in the quarter should help investors' confidence. I will also be looking for how much Apple's cash position increased in the quarter despite the buyback and increased dividend payout.
  • How is the company doing in maintaining or growing market share in major markets? This is liable to be a mixed bag as I expect the company maintained or grew share domestically but dropped some share in other major markets like China.

Third Quarter Watch Items:

Obviously, how the company executes going forward is more important than these quarterly results for the long-term health/growth of the stock. The three possible catalysts that I see that could come in the next quarter will be confirmation of larger screen devices as well as a lower cost iPhone for emerging markets, a distribution deal with either China Mobile (NYSE:CHL) and/or NTT DoCoMo (NYSE:DCM) or patent litigation détente with rival Samsung (OTC:SSNLF). Any of these events would be a positive for the company and the stock.

Buying The Dip:

If we do get any sort of significant sell-off triggered by conservative guidance, I will be adding to my position. AAPL is a very cheap stock, which was detailed in Barron's this weekend. Roughly, 40% of the company's $400B market capitalization consists of net cash and marketable securities. Taking out this net cash from the equation, the shares sell for ~6x forward earnings. The stock also yields almost three percent (2.8%), the company will be buying back approximately $2B worth of shares a month through 2015, and the next version of the iPhone should buoy revenues near the end of 2013. This is a combination that should appeal to value investors.

Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.