Apple Shouldn't Disappoint On Earnings (AAPL, AMD)

| About: Apple Inc. (AAPL)

By Carl Howe

On April 19, 2006, Apple Computer Inc. (NASDAQ:AAPL) will report its first quarterly earnings since it introduced Intel-based MacBook Pros, Mac minis, and iMacs. Forbes had an article last week noting that UBS cut its price goal for Apple to $95 on the basis of weaker PC sales.

Because Apple didn't start delivering Intel-based (NASDAQ:INTC) machines until midway through the quarter, I can understand their skepticism, but I don't buy their forecast of nine percent drop in computer sales from a year ago. Given the sheer number of new Apple laptops and iMacs I've been seeing around, I believe that Apple managed to sell about as many computers as it did last year at this time (which, by the way, wasn't a terribly stellar quarter as Apple quarters go).

Add on sales of about 9.3 million iPods this quarter, and my model comes up with Apple earning $401 million on nearly $4.2 billion in revenue. That works out to $0.47 a share, which is slightly above analyst consensus estimates of $0.45 a share.

All that said, Apple's projections for how they see demand shaping up for their fiscal Q3 will be very interesting to watch. On Thursday, Advanced Micro Devices Inc. (NASDAQ:AMD) blew the doors off its earnings (many believe that its gross margins this quarter may surpass Intel's), yet projected a weak upcoming quarter. And Intel similarly isn't looking any better.

But unlike those two semiconductor giants, Apple is at the beginning of its new product cycle of Intel-based Macs, whereas a lot of the PC world is stuck waiting for Windows Vista in 2007. And as has been noted, for every percent of PC market share Apple gains, it gains about $2 billion in revenue. I predict we'll start seeing that some of that revenue appears on Apple's income statement in Q3. And even with the product transition this past quarter, the company will post nearly 31% growth over the same quarter last year.

Now that's thinking different.

Full disclosure: The author owns Apple common stock.

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