AAPL Earnings Will Fuel The Markets Next Move

| October 18, 2011 | 0 Comments

Are you ready for Apple’s (AAPL) earnings?

You better be… The consumer electronics heavyweight will report fiscal fourth quarter earnings today after the markets close.

The consensus estimate is for a cool $7.31 per share.  But there are whispers of earnings coming in as high as $8.42 per share!

I know it sounds crazy… but the entire market’s next move is hinging upon what AAPL does today.

Let me explain…

Analysts weren’t always expecting AAPL to earn $7.31 per share this quarter.  In fact, when the quarterly estimates first came out back in 2009, they were only expected to make $2.54 per share.

In other words, analysts have increased their estimates by a whopping 187% since they first came out.  And it’s one of the few stocks analysts continued to increase estimates for as the economy slowed over the summer.

It’s no wonder AAPL has shot up more than 150% over the same time.

Look, it’s not rocket science… The more money Apple makes and the more money they’re expected to make, the more money their stock is worth.

Here’s the problem…

If Apple disappoints, it will send a clear signal to investors. It tells everyone even the mighty AAPL isn’t immune to the slowing economy. And the days of AAPL consistently growing earnings and beating expectations are over.

If AAPL can’t grow earnings in this economy, I don’t think anyone can. And that’s the kind of bad news likely to send this market careening off a cliff…

The good news is… I don’t see AAPL missing estimates.

Simply put, Apple executives are great at managing expectations.  And they have too many popular products in the midst of wide scale adoption to screw this up.  (I know it doesn’t impact this quarter’s earnings, but they’ve already sold more than four million of the new iPhone 4S’ in three days!)

More importantly, investors will be focusing on what Apple’s new CEO, Tim Cook, has to say.  And at the forefront of investors’ minds is… “What will he do with the hoard of cash (around $82 billion) on AAPL’s balance sheet?”

Look, everyone knows Apple is a great company today because of innovation.  And Steve Jobs was the genius behind it.  But sadly, he’s no longer with us.

Now, more than ever, investors need the new CEO to show how AAPL plans to continue innovating.  And a big clue is how they intend to manage their hoard of cash.

Here’s the bottom line…

If Apple misses earnings today, it’s going to get ugly.  The entire market will likely nosedive along with AAPL this week.  But if they meet or beat estimates and deliver clear guidance about how they intend to continue growing and innovating, we should see it spur the stock and the entire market higher this week.

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Category: Stocks

About the Author ()

Robert Morris is the editor of Penny Stock All-Stars, an investment advisory focused on discovering small-cap and micro-cap stocks that are destined to become the market’s next Blue Chips. The Wall Street veteran and small-cap stock specialist is also a regular contributor to Penny Stock Research. Every week, Robert shares his thoughts with our readers on a variety of penny stock-related topics. In addition to Penny Stock Research, Robert also writes frequently for two other free financial e-letters, ETF Trading Research and the Dynamic Wealth Report. He’s also the editor of two highly successful and popular investment advisories, Biotech SuperTrader and China Stock Insider.

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