Apple Earnings Preview: Expecting Blockbuster Quarter

Apple [[AAPL]] is scheduled to report their fiscal first quarter 2010 results after the market closes on Monday, January 25, 2010. Based on our analysis, we at EarningsPreviews.com are expecting Apple to report much stronger than expected quarterly results that easily exceed Wall Street’s consensus expectations.

 

Analyst Expectations

We are forecasting revenues of $12.25 billion and EPS of $2.16. This would represent a 20% increase in revenues from last year’s $10.17 billion in the same period. The current analyst consensus estimates calls for revenues of $12.01 billion and EPS of $2.05. On October 19, the company offered first quarter revenue guidance of $11.3 – $11.6 billion and $1.70 – $1.78 diluted EPS.

 

Earnings Analysis

Apple’s strong product lineup made them a clear winner over the 2009 holiday season. Initial indications point to blockbuster sales of the increasingly popular Apple iphone and Mac computers. Despite the economic recession, holiday spending data shows that consumers are not reducing their spending on consumer electronics.

 

While Apple’s product line remains very robust, investors and consumers are anxiously awaiting the expected unveiling of the new Apple tablet on Jan 27th. Expectations and buzz has been building for months around this mysterious new Apple offering. Blowout quarterly earnings along with another hot new product in the Apple arsenal will no doubt cause Wall Street analysts to raise their growth estimates and price targets for Apple’s stock.

 

Stock Performance

Apple stock gained a phenomenal 147% in 2009 and easily outperformed the 19% increase in the Dow Jones industrial average. Undoubtedly, there are investors all over the world who regret not buying Apple stock when it was trading below $100 per share.

 

Valuation

Apple’s stock is now trading at 26x consensus 2011 EPS estimates. This is a well-deserved premium to the relative valuations of their peer group. With consensus estimates likely to increase following a blockbuster holiday quarter, Jim Cramer’s $300 price target for Apple may not be too far off.

 

Recommendation: Buy with a $250 price target

 

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