Apple Guidance Can Turn Negative Sentiment on Its Head

by: Jason Schwarz July 21, 2008 | about stocks: AAPL    

Jason Schwarz

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Apple (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

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This article has 21 comments:

  •  
    Jul 21 03:14 PM
    That's if they don't let Peter O. talk.
    Reply | Link to Comment
  •  
    Jul 21 03:26 PM
    Looks like shorts are scrambling for the exits now.
    Reply | Link to Comment
  •  
    Jul 21 03:45 PM
    "One size fits all!"

    The expectations are completely unrealistic for a small cellphone manufacturer that's never going to gain a market-share in excess of 1%.

    Reply | Link to Comment
  •  
    Jul 21 03:56 PM
    Market share of smartphone biz is much higher. And i would not consider apple as a small cell phone manufacturer. they sell other things that comprise about 98% of their revenues.

    Reply | Link to Comment
  •  
    Jul 21 04:29 PM
    If Apple doesn't come through the market is likely to be in turmoil tomorrow since Sandisk missed big.
    Reply | Link to Comment
  •  
    Jul 21 04:36 PM
    "Quarterly iPhone units sold were 717,000 " ????? That's nothing...
    Reply | Link to Comment
  •  
    Jul 21 04:37 PM
    What guidance!!.
    OK, I give up. I have to go panhandle now.
    Reply | Link to Comment
  •  
    Jul 21 04:37 PM
    Well, as usual they killed, but lousy guidance isn't going to do anyone any favors in the short-term.
    Reply | Link to Comment
  •  
    Jul 21 04:45 PM
    This was predicted. I wrote in an earlier post guidance would be $1 for the fwd quarter and create a buying opp in the mid 150s (last Q post-eps low in after hours). Company is firing on all cylinders. I dont look at fake guidance. Dont think you need to run after it in after hours since the market will open pretty weak on the AXP news. Plus SNDK, TXN, VMW all weak results. Set buy limits at 155 and you will be happy.

    Good luck folks. Will - when u are done with the bedpans, i have some stuff you can clean also.
    Reply | Link to Comment
  •  
    Jul 21 04:47 PM
    Autsch!! Four times 717.000 makes...let me count....3 million phones a year?

    Reply | Link to Comment
  •  
    Jul 21 05:03 PM
    Apple management kills me....and the problem on betting either way is the 1st time you short them on earnings the morons will give good guidance.
    Reply | Link to Comment
  •  
    Jul 21 05:12 PM
    The 717k iPhone number did not include 3G phones. I also heard they sold 1mm 3g phones during the first three days of release so I was a little confused.
    Reply | Link to Comment
  •  
    Jul 21 05:18 PM
    I don't think the 717k iphone number includes 3G phones. I read they sold 1mm 3g phones in the first three days so that would expain the discrepancy.
    Reply | Link to Comment
  •  
    Jul 21 05:22 PM
    This was so obvious. We all knew they would guide low as always, and we all knew there would be the usual "the sky is falling" knee jerk reaction sell off. I for one am staying the course long, and know the analysts will eventually post some positive comments that will move the stock north again. Back to school will be strong, and as more countries are added to the iPhone slam dunk the next quarter will be a killer, and patience will pay. Avoid the stampede to sell, and just chill for awhile.
    Reply | Link to Comment
  •  
    Jul 21 05:24 PM
    <i>"Autsch!... Four times 717.000 makes...let me count....3 million phones a year?"</i>

    Ummm....you think sales of the vers. 1.0 iPhone might have been a teensy suppressed by the knowledge that 2.0 was coming imminently?

    A lot of people were skeptical about the 10 mil iPhones by the end of 2008, but they're going to blow past that with the new one.
    Reply | Link to Comment
  •  
    Jul 21 05:25 PM
    MIjake, you are indeed a wise man. Oppenheimer also mentioned a "new product introduction" for Q4 that he couldn't say more about in the conference call. The hits will just keep on coming for Apple.
    Reply | Link to Comment
  •  
    Jul 21 05:43 PM
    Beware! The P/E-ratio is 34! There is a plenty of potential downside here.
    Reply | Link to Comment
  •  
    Jul 21 05:55 PM
    why do you think is the high p/e ratio not a problem?
    Reply | Link to Comment
  •  
    Jul 21 07:11 PM
    wow148.80 price because aapl beat expectations ---i am making u-turns in my office trying to get a rational understanding as to what is going on ---so i bought more --
    Reply | Link to Comment
  •  
    Jul 21 07:44 PM
    The only thing that landed on their heads is us fools for believing this f company woyld do the right thing for shareholders. Well, they didsn't they screwed us and they don't give a flying f if they did. Peter the f o has to be emoved. He sucks.
    Reply | Link to Comment
  •  
    Jul 22 08:17 AM
    In complete agreement with you!
    Reply | Link to Comment
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