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By: Brendan Gilmartin

Apple (AAPL) is scheduled to report 4Q 2012 earnings at about 4:30 p.m. EST on Thursday, October 25, with a conference call to follow at 5:00 p.m. EST. Given Apple's weighting in the key indices, look for movement in the U.S. index futures and other broad gauges when it reports its earnings. Much of the attention is likely to focus on iPhone shipments, which are forecast to come in between 25 million and 26 million following the September unveiling of the iPhone 5.

Aside from Apple shares and the index futures (S&P & NASDAQ E-minis re-open after the 4:30 EST release), PowerShares QQQ (QQQ) and related ETFs, along with other technology shares are impacted by the results.

Apple is expected to earn $8.84 per share in the 4Q 2012 period (range is $8.00 to $10.05) (Source: Yahoo! Finance), well above the $7.05 in the prior year period and the conservative outlook for "about" $7.65 per share provided in April.

Revenues are expected to come in at $36.91 billion, above the company outlook of "about" $34.0 billion.

More recently there has been talk that Apple could post weaker than expected iPhone sales (current estimate is for 25 million to 26 million shipments), due to supply constraints rather than weaker demand. iPad shipments are forecast at 17 - 18 million units.

Keep an eye on the following names that tend to be impacted by Apple's iPhone numbers:

  • Qualcomm (QCOM): Provides baseband processor.
  • Broadcom Corp. (BRCM) : Provides Wi-Fi/Bluetooth/Frequency Modulation (FM) module.

Recent News

  • 10/22: Sterne Agee Analyst Shaw Wu raised the 4Q EPS estimate on Apple from $8.79 to $8.93 and maintained a Buy rating and $840 price target, according to a post on StreetInsider.com. The firm sees the iPhone 5 and iPad Mini as key growth drivers.
  • 10/22: Barron's reported that Bernstein Research reiterated an Outperform rating on Apple and an $800 price target. However, the firm cut its 4Q EPS estimate to $8.59 from $9.27 and the revenue forecast from $36.2 billion to $34.4 billion, based on weaker demand patterns for the iPhone 5 and supply constraints.
  • 10/17: Janney Montgomery maintained a Buy rating on Apple and raised the price target from $720 to $745, according to Barron's. However, the firm cut its estimate for September quarter iPhone shipments from 27 million units to 26 million.
  • 10/16: According to a report on Barron's, Jefferies put out a positive preview for Apple, calling for iPhone shipments to exceed forecasts and suggested that the forward guidance may not be as conservative as usual. The firm carries a $900 price target.
  • 10/09: Nomura Securities initiated Apple with a Neutral rating, according to StreetInsider.com. The firm is positive on Apple's near-term prospects ($710 price target), but is cautious over the long-term into Fiscal 2014.

Technical Review

Apple shares recently topped out at an all-time high of $705.07 on September 21, before falling about 11% in the ensuing month. From here, there is soft support in the $610-$620 range using the July highs, with downside risk to the 200-Day SMA near $585. But if the earnings are weak, the recent free-fall implies much of the weakness is priced in, while the momentum oscillators (RSI & MACD) are near oversold territory. In the event of a bounce on earnings, watch $640 as the first resistance point, followed by the 50-Day SMA near $660. (Chart courtesy of StockCharts.com)

(click to enlarge)

Summary

Apple shares are in correction territory after breaking out to an all-time high last month amid concerns over the reception of the iPhone 5 and supply constraints as suppliers struggle to keep up with demand. With that being said, much of the focus will center on iPhone shipments during the quarter, with forecasts ranging from 25 million to 26 million units. A figure below the low end of range could have negative consequences for Apple shares and the broader market, unless the company is able to offer up a more positive outlook for the December quarter, rather than stick with its tendency to guide conservatively.

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Source: Apple Shares Slip To 2-Month Lows Ahead Of Earnings; All Eyes On iPhone Shipments