Apple Guidance Can Turn Negative Sentiment on Its Head

Jul.21.08 | About: Apple Inc. (AAPL)

Apple (NASDAQ:AAPL) management has a great opportunity to turn sentiment positive by confirming consensus guidance. The company has been roiled by hedge fund rumors concerning the health of Steve Jobs to the point that the stock is actually down after the blow out performance of iPhone 3G. Even with all of the positive developments from Mac, online movies, app store, mobile me, etc., the stock is down 17% for the year and 6% for the month.

We maintain our stance that Apple will flourish with or without Steve Jobs and that Apple is on the verge of major market share gains in both the computer and phone markets. Apple’s history of negative guidance is priced into the stock, any positives from the company will be met a rally on Wall Street. Investors are looking for a catalyst to push this stock over $200 and today’s numbers could mark the beginning.

Historically, July 21st marks a nice starting point for big Apple runs. With back-to-school shopping on the horizon, this is typically a time for Apple to begin a run that lasts into Thanksgiving. In 2005, the stock rallied from $43 to $68, in 2006 it went from $60 to $91, and last year it surged from $143 to $182. This year should be no different as the iPhone story is still not priced into the stock. Management has an opportunity to turn investor focus back to where it should be-the fundamentals.

Disclosure: Long AAPL