Apple Investors Nervous as Earnings Call Approaches

by: Zach Bass posted on: July 21, 2008 | about stocks: AAPL    

Individual investors have been conditioned by Wall Street big money to be extremely guarded going into Apple (AAPL) earnings calls. They have no idea what to expect. If the pattern of the last earnings calls is any indicator of what this one may portend, then they are rightfully nervous and perhaps dismayed. They are fearful that the stock will plummet 10 points, or swing violently, shaking many off the stock with big losses.

It doesn’t seem to matter to Wall Street that Apple, quarter after quarter, blows away its own conservative guidance and pumped up analysts estimates. Big money seemingly throws a blind eye to fundamental indicators like customers that crowd Apple Stores day and night, product launches that produce lines out the door, around the corner, extending several city blocks. These market mavens don’t want to hear it. Instead, they will be deftly tuned to that seemingly innocuous statement by Tim Cook or Peter Oppenheimer, that they can twist into a storm cloud, to justify bludgeoning the Apple faithful investor.

Why will they do this? Because they can. And they make money on the way down, and then again on the way up. The greater the swing, the more money they’ll make.

So, what’s the market environment like going into this earnings call? At the very large it’s not great. We’re in a Bear market, there’s no doubt there. But we’re also on the precipice of a strong Bear rally. Oil for example has dropped four consecutive sessions losing two critical support levels, first the uptrend line at 136, then second the 50-day moving average at 133.40. This is huge, as we all know that Oil has been the principle contributor to inflation, and inflation has been the primary driver of this Bear market.

Click to enlarge

Ok, so how can we be sure from a technical perspective that this drop in Oil will stick? The best way we determine that big moves have staying power is with a backtest soon after the breach. And that’s exactly what happened with Oil on Friday (July 18). After plunging through the 50-day support line, Oil made a move back up but was blanked, falling into the close and ending at 129.47 -0.71 (0.55%). That culminates a complete breakdown with a confirming backtest. Oil dropped a total of 18.47 points (12.5%) off the high of 147.90 in just a week! Wow!

Now, let’s combine this great news with a rebound by financials that was equally, if not more impressive. This rebound was initiated by great earnings from key players like Wells Fargo (WFC), JP Morgan (JPC), and the big one, Citigroup (C)! Wells Fargo even raised its dividend by 10%! That’s a slap in the face to the financial Bears. Sure, there are still going to be problem lenders out there with more write downs, but it’s obvious now that things aren’t nearly as bad as people thought, and more importantly it looks like the industry can absorb the write downs and continue to operate.

We’ve got lots of earnings news ahead of us, and key economic indicators coming up this week. So, this rally still has some hills to climb. But the momentum is clearly behind the rally. So now, Apple becomes the linch pin to propping up the Tech Sector. If Apple reports well, and the Wall Street big guys have any sense at all, then this rally will continue.

Disclosure: Long AAPL

This article has 54 comments! Add yours below...

Zach Bass

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This article has 54 comments:

  •  
    TraderZ
    Jul 21 07:40 AM
    I have lost all respect for Seeking Alpha for letting stories like this make it online. Lets see what you have said: we are in a bear market (gee thanks chief), and apple investors are nervous (really? or you mean you're nervous? how do you know? what supporting facts do you have?).

    No analysis of aapl performance post-eps for any extended period of time. Just some anecdotal nonsense.

    What a joke. SeekingAlpha no longer bookmarked.
  •  
    mogando
    Jul 21 08:11 AM
    just FYI : JPMorganChase is JPM not JPC.
  •  
    Pauly B
    Jul 21 08:20 AM
    I agree with Trader Z on many points. My questions for Apple are whats next?

    Ok we have the super I phone, computers, I tunes and so on but the pipeline appears to be stalling. The last Apple event was kinda a yawner. Their business model of making niche electronics requires them to be nimble.

    I am also bothered by them not trying to make penetration into the business sector in a big way.


    The last big question is the health of it's CEO?

    Looking at the chart my guess is that many fund managers are backing out of this stock for these reasons.
  •  
    Zach Bass
    Jul 21 08:32 AM
    My Website
    Please excuse the typos, and I thank you for pointing them out. I will endeavor to do better in the future. Unfortunately I don't have an editorial staff behind me, I'm a lone blogger in the Wilderness. It's tough getting these posts out late while maintaining at least 5 hours sleep.
  •  
    Apple Heavy
    Jul 21 08:52 AM
    Hi, please pull posts which contain explicit or implied profanity, so that the rest of us can participate in a constructive manner.
  •  
    Murphy
    Jul 21 08:57 AM
    My Website
    Investors are nervous or *day traders* are nervous? It seems like these sites only cater to day traders. I've been long on aapl for years. Watching their sales and market share increase at a blistering pace doesn't make me nervous at all.
  •  
    WACG
    Jul 21 09:05 AM
    Apple Heavy - IMPLIED profanity!!!! YOW!! THAT is a real howler. You must be one dogmatic, narrow minded, sanctimonious, piece of ... ummm ... work ... Yeah that's it! Piece of work! Why don't you drag your Heavy over to where the other anal retentives are cooperating in a constructive manner by chanting soothing non-informative blather that you seem to need. BLEH!
  •  
    Apple Heavy
    Jul 21 09:18 AM
    So much for this bog and the sick minds that plague it!!
  •  
    AndyS
    Jul 21 09:25 AM
    My Website
    I am already down 2K on my apple investment and as I lamented in a recent post, I wish I had the bought the stock this week, rather than before the iPhone. Anyway, I will wait and see if my paper losses grow or disappear today.
  •  
    digivision
    Jul 21 09:27 AM
    My Website
    I am not nervous .. quite the opposite , I am hoping for Apple to drop into the low 100's, sure it hurts a bit when it drops so much in one day but it's called weeding out the squeamish investors, those that buy the stock at the highest and sell at the lowest or near it . For me and those like me that are in for the long term these are opportunities to buy more ... like a sale day at the mall
  •  
    offtheobt
    Jul 21 09:35 AM
    My Website
    TRADERS are nervous. They are looking for immediate action, and ready to leave any second, anxiously reading every dim-witted post or blog. Us INVESTORS, on the other hand, bought way back when it was really cheap, and are in AAPL for the long haul. The MM's run the price up and down, the traders jump in and out, the investors hang it there and get rich!
  •  
    HowieDad
    Jul 21 09:41 AM
    Maybe a special topic, 'mud wrestling', should be established on Seeking Alpha so that all of its enthusiasts will have a special play pen in which to sling their slop.
  •  
    Toni
    Jul 21 09:45 AM
    Unless AAPL reports more than 1.12 and guide reasonably, I believe it will go down, below 160 (157-158).
    Today some articles are back again discussing Job's health, the suggested (wanted) direction is clear.

    Hope I'm wrong, but at the worst could be a nice occasion to add (in a little while), or trade it.
  •  
    will
    Jul 21 09:48 AM
    This stock blows!
  •  
    Neil Cohen
    Jul 21 09:56 AM
    This article is completely useless offering no insight or forward thinking. You managed to cover all possibilities ensuring your call will be correct..... and you conclude with, " If Apple reports well, and the Wall Street big guys have any sense at all, then this rally will continue." - wow, genius....
    Please stop wasting out time
  •  
    jswede
    Jul 21 10:16 AM
    "what's next", Pauly B?

    How about 10% PC market share...? then 15%... then 25%, and so on...

    ...and exactly OFFTHEOBT: long horizon investors have zero to fear... perhaps just some more opportunity to buy more..
  •  
    will
    Jul 21 10:27 AM
    JW,

    You must be one of those Big Boys! Lets see, Apple's big day, stock is down to 164, Rimm is up 4% and the beat goes on! See you at 150 tonight!
  •  
    DickM
    Jul 21 10:29 AM
    I am serene about APPL. After 12 years long with no ins or out, why should I be otherwise? Agree with JW above. With an adjusted cost basis of about $3/s, and this stock going to $300 sooner or later - - what the heck about the short term.
  •  
    Uruz1
    Jul 21 10:33 AM
    I'm with "Murphy". While I don't like seeing my favorite stock go down, I invested in the company nearly 8 years ago and have no intention of selling it this year, either. I couldn't care less if some day trader loses his shorts today or tomorrow or next month. A drop of 10 points (or 20 or 30), while not welcome, has no more effect on me than a rise of the same amount.

    Electronic trading has made people careless, greedy and, quite honestly, stupid.
  •  
    texasgolfer
    Jul 21 10:42 AM
    if apple were in infrastructure they would sell you an upgraded brooklyn bridge. apple lacks transparency (like banks) and just continues to hype its upgrades. the phone wars are far from over and the full impact of the recent "new" pricing, etc has not been adequately analyzed for future implications and contributions to profit. usually when the price of something is cut, profits decline.
  •  
    JW, PhD
    Jul 21 10:52 AM
    Will, us big boys are sorry that you are taking it in the ass today. I'm not losing anywhere but on paper right now, as I don't sell stocks on the way down. I don't know how tools like YOU invest, but I accumulate as they drop, and sell when they hit highs. If it drops to 150, then I'll simply own more shares tomorrow, and I'll be that much better off when we break $200 later this year. You've clearly don't have much going on in the balls or brains department. So sad.
  •  
    Robcal1
    Jul 21 10:53 AM
    Again JW, supposed Phd, your point is ridiculous. We're talking about the here and now and how what's happening to Apple makes no sense at all! I don't care how long it takes to make my fortune. If it took 9 years like it took you, then fine. I'm just fed up with Apple management blowing it consistently this year. They're not going to get over on Wall Street, they're just not!!! They will get their butts kicked every single time. Now is an overall downward direction the direction you'd like Apple to head? How about if Apple took back that fortune you made in less than half the time? Have you stopped at all to think about that? If somebody doesn't do something soon, Apple's stock could seriously get punished! How could you possibly not be concerned? I don't care if you're willing to wait another 20 years for any kind of fortune.
  •  
    Brandon
    Jul 21 10:56 AM
    The fact is, Apple beats estimates every time and the stock drops. What the stock does today is entirely up to Apple. All they have to do is not blow up their own stock by cautioning the street.
  •  
    mollytjm
    Jul 21 11:02 AM
    ...."the last event was ...a yawner"??? 'the pipeline is stalled'???... who the heck are you, Bill Gates? the last 'event' was the release of the 3G iPhone. my apple store still is jammed and lines out the door.

    Apple constantly wins award, around the globe for innovation and has a huge, brilliant R & D staff and LOTS of $. even if eventually Jobs is gone, Apple is here to stay and will continue to innovate and make more $. This is not Microsoft which took 7 years to develop a bad product.
  •  
    JW, PhD
    Jul 21 11:02 AM
    You know you've got an inferiority complex when you have to call someone else's education into question. You've lost this argument, Robcal. You're gutless and weak, and you don't belong in this market. It's obvious for anyone to see. Get out while you can still afford to put gas in your car. AAPL would have to drop to pretty much nothing for me to even approach losing money in the stock, and the chances of that are probably right around the same level as you winning the Powerball lottery. Hey, that might be a better "investment strategy" for someone with your expertise...
  •  
    will
    Jul 21 11:03 AM
    JW,

    Perhaps you can join Peter O. tonight and share your pearls of wisdom with him as he sandbags guidance? Then you can thank him for having the stock tank to 150 and assure him you will be buying more. That would be a brilliant conversation among two Apple deadheads.
  •  
    JW, PhD
    Jul 21 11:12 AM
    Will, do you actually OWN this stock, or are you just here running your ignorant mouth? If you actually hold any AAPL, I'll buy as many shares as you care to sell at $150. If you really think it's headed for the toilet, I'd think you'd jump on that deal. Get back to me. See, for an INVESTOR like me, if the stock hits $150 after earnings tonight, that doesn't qualify as a "tank". But I understand how nickel-and-dime dayTRADERS like you and Robcal would be whimpering on the floor afterwards. Sorry you don't have the brass ones (or bankroll) for long-term investment strategy. Good luck with your trading...you'll need it in this market.
  •  
    DavidK
    Jul 21 11:30 AM
    Nervous you say??! I don't thinks so. Tell me another company that has this much going for it and be real this time.
  •  
    will
    Jul 21 11:37 AM
    PHD man,

    Big run up into earnings! Down to 163 while RIMM is up 4%. Stay smart friend.
  •  
    TraderZ
    Jul 21 11:49 AM
    Clearly Will is not an owner of any shares. If he his, I would bet his holdings are limited to 10 or 20 shares. He also is confident that Apple will trade to 140-150 and yet I dont see any comments about a put position or other trading strategy. He's trying to get a rise out of some folks and he's succeeded in that regard.

    Nevertheless, I do think Apple may trade to mid 150s on anything less than 1.20 at which point I plan to add to my position. If I am wrong, then great news all around as I'm sure it will lift the tech sector and hopefully my other tech positions.
  •  
    JW, PhD
    Jul 21 11:59 AM
    TraderZ, less than 1.20 reported or 1.20 guided? Because the consensus for reported Q3'08 is around 1.08 last I checked, and the whisper number is 1.14.
  •  
    will
    Jul 21 12:11 PM
    Who's reporting tonight Apple or Rimm?
  •  
    reagan
    Jul 21 12:12 PM
    The hostility today is really ridiculous.
  •  
    Brandon
    Jul 21 12:12 PM
    The earnings are secondary to guidance and the sad fact is, Oppenheimer will probably kill the stock. Having said that, I think Apple is at at least $220 by Christmas.
  •  
    Yourope
    Jul 21 12:13 PM
    Apple's sales figures regarding iPhone do not seem so good. Apple has sold only 1 million 3G iPhones over three days while Nokia sells 1,5 million handsets every day of the year. And yet, these three days were surely the best for iPhone this year.
  •  
    JW, PhD
    Jul 21 12:20 PM
    Yeah, and everyone knows that all Nokia handsets cost a minimum of $199 and are tied to a single provider in most countries, right? Wake up, dunce.
  •  
    TraderZ
    Jul 21 12:49 PM
    JW -

    I was referring to 1.20 for the current Q. Guidance and most of the street is at 1.13 (even though first call is 1.08) but the analysts still like to see what % the company beats by relative to prior beats. Its an absurd metric but many analysts report on it. Having said that, i think the weakness over the past few days take away a lot of that risk such that something in the 1.15 range will probably be just fine. As for guidance, that is always a risk with this company - I read somewhere that one analysts is expecting a guide to about $1.00 which is well below consensus. How its received initially is anyone's guess but if we do get a retest of the post Q1 eps low (155 i think) I am a buyer.
  •  
    DickM
    Jul 21 01:03 PM
    And, what else does Nokia make and sell?

    Nokia told the world that the iPhone would never make it, the phone market is too complicated for a would be interloper. Now, Nokia's CEO is scared shxxlexx, scrambling to acquire competency in operating systems, and scrambling to integrate technical forces into something he "hopes" will compete with Apple.

    The iPhone results will not be part of today's report by Apple. You can read why elseshere.

    I have to laugh also about the RIMM "experts" - all smiles about the next model, to have "touch screen" technology, knowing that they won't ever have - at least for years - the multi touch Apple technology - which is extensively not only patented but is copyrighted. Copywrites do not expire. And, yes - you can Copyright (takes a long time and much effort) a technology just as Apple Copyrighted the iPod look and the navigation wheel. The Copyright is the killer deterrent to would be "me-too" copiers.
    The next quarter report will have the iPhone results.

    JW - these negative looney critics don't own any stock. Just lurker tramps, hoping to stampede a sell. Their views, if they really believe them, are at the very fringe of the probability bell curve. Right where they belong. At the fringe.
  •  
    will
    Jul 21 01:13 PM
    Do you know why shorts and hedge funds can't take down great companies such as IBM, GE, or Potash whenever they feel like it? Because these companies will buy back their shares when attacks on their stock price occur. It does 2 things: 1. Gives the company a great
    return, 2. stops the shorts/hedge funds from repeating becuase they know these great companies won't stand for it. Then we have Apple, the most attacked company on Nasdaq open for shorts/hedges anytime to do with as they please. It's like the whore of Nasdaq. Apple gets murdered but is too stupid enough to do anything about because they have Peter O. sitting on his $17B and he's rather ensure it sits in the bank as opposed to being used as a competitive weapon against manipultative attacks. Sad, but true...
  •  
    JW, PhD
    Jul 21 01:16 PM
    Wow...everytime I think Will can't say anything more stupid than a previous comment, he proves me wrong.
  •  
    TraderZ
    Jul 21 01:26 PM
    The comparison to Nokia is really absurd and highlights the ignorance of many people. Nokia is selling a much lower margin product and really isnt in many lines of business. Apple's gross margin for its iPhone is about 65% and Nokia's avg margin is about 30%. Nokia is selling a commoditized product. Apple is selling a more complete device that is driving many new users to purchase computers and apple software which are the bread and butter of Apple's business.

  •  
    TraderZ
    Jul 21 01:29 PM
    Will = The resident idiot.

    I love the inclusion of Potash along with blue chips IBM and GE. GE wasnt taken down? I remember it being taken down 20+% in one day in April. Further eveidence that seeking alpha needs an ignore button.
  •  
    will
    Jul 21 01:30 PM
    Rimm is kicking out ass again. I thought it was suppose to be Apple's day? Oh well, better ask the PHD man why?
  •  
    JW, PhD
    Jul 21 01:40 PM
    Yeah, RIMM should be kicking ass...have you looked at its one-month chart compared to AAPL. LOL, what an utter retard you are. What time do you have to show up for your janitorial engineering job this evening?
  •  
    will
    Jul 21 01:43 PM
    I work 3rd shift in a hospital taking care of clowns like you who think they know everything. Apple is toast, got it, toast! Rimm will be 150 before Apple sees 150, after it drops to 140 tonight. Shake and Bake PHD man. Between you and Peter O., it's a toss up on who will push the stock down more.
  •  
    JW, PhD
    Jul 21 01:51 PM
    Spoken like a pathetic moron who is jealous of people like me who actually make money in the market. Don't worry, some day you will luck out and maybe make enough to pay the rent for a month or two. Even a blind squirrel occasionally finds a nut. Have fun changing those bedpans, loser.
  •  
    will
    Jul 21 02:32 PM
    Apple's glory days and leading the Nasdaq are all in the past. This stock is no longer a leader, it is a stock taking up space on the Nasdaq so manipulators can have a field day with it anytime they want. That my friends is the new Apple. No longer a darling just a callgirl.
  •  
    Yourope
    Jul 21 03:37 PM
    iPhone's market share worldwide 2008 is less than 1 per cent so what's the fuss? Most Europeans see a phone with a two mpx camera in excess of $700 (including the hidden cost) as a pure joke. But Steve Jobs is surely a funny guy.
  •  
    JW, PhD
    Jul 21 03:41 PM
    Yeah, it's such a joke in Europe that the 3G sold out pretty much everywhere it was being sold, and in Russia they are being resold for upwards of US$1200, and the old model can bring close to US$800. I'd say YOU were the funny guy, but stupidity isn't all that humorous, really.
  •  
    Toni +
    Jul 21 05:06 PM
    Above 1.12$ but very conservative guidance.

    Cfr. my previous post.

    After hours 158. The 70% probability turned out as very real.

    Thank you.


  •  
    JW, PhD
    Jul 21 05:10 PM
    But you're still an idiot, Toni. No earnings report can ever change that fact. You're welcome.
  •  
    JW, PhD
    Jul 21 06:31 PM
    Aw, the poor wittle bedpan troll wants to try to get people all riled up. Sorry, WIll...nobody pays any attention to what ignorant fools have to say. Run along and try to make trouble someplace where they haven't already recognized what a moron you are.
  •  
    Toni +
    Jul 21 07:14 PM
    LOL

    Ben, I'll enjoy watching you lose money on your AAPL short."

    signed by JW, PhD.

    seekingalpha.com/artic...

    I enjoyed that me too!
  •  
    JW, PhD
    Jul 21 07:25 PM
    Toni = Idiot

    signed by JW, PhD.
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