There are a few stocks I really look forward to earnings from.
Caterpillar (CAT) and Cummins (CMI) tell us about China/EM growth.
And we know what we just learned from CMI... it's getting ugly out
there. CAT reports July 25.
And then there's Apple, which is one stock I say where you
always buy the dips
. Not just a "tech" story, it lives on its own stage where its
"must-have gadget magic" makes it a consumer revolution story.
Now, it is also a huge developing markets story as iPhone and
iPad sales ramp up in China and other places where emerging
consumer classes aspire to have the things that Japanese and
American citizens have.
So not even a global slow-down that has firms like Barclays and
JPMorgan slashing technology cap-ex and earnings estimates seems
like it will affect Apple much. Maybe Google (GOOG) who reports
next week is another new tech bellwether immune from this.
But one analyst at a respected firm begs to differ and stuck his
neck out this week to say so. Keith Bachman of BMO Harris Capital
Markets warned that the next two quarters for Apple could be much
softer than consensus expectations. You can easily search for the
story in Barron's and elsewhere, but I will give a couple of
details I can recall.
Bachman raised his estimates for iPhone sales but sees iPads
negatively affecting Mac numbers. He is mostly focused on the
September quarter where he sees only $33 billion in revenue vs the
consensus of $38.5B.
Recent downward estimate revisions in the Zacks data may be from
June quarter: down to $10.18 from $10.21 vs consensus $10.34
Sep quarter: down to $9.84 from $10.55 vs consensus $10.27
Full year 2012: down to $46.15 from $46.90 vs consensus
And here's a quote from his report...
"However, we think investors are well aware of the product
cycle, and likely negative revision to near-term estimates.
Moreover, we think Apple shares will respond in a positive way to
the pending launch of the new iPhone, as we look to year-end. If
Apple is able to launch the new iPhone in the month of September,
then actual unit shipments in the September Q will be less
relevant, as management and investors will focus on the momentum of
the new iPhone."
Okay, now to my point. I think the stock market is fighting to
justify its existence near S&P 1350 and I think Apple will take
out the last swing lows near $566 before it goes to new highs above
The current pre-earnings ramp above $600 may be justified for
some investors who cant afford to be caught short AAPL shares if
they do surprise to the upside. And if you are long-term investor
with at least a 2-year horizon, I think buying at $600 is a good
But for short-term swing traders, gaming the 10% you might make
in the next few months isn't a good high-probability edge. Better
to wait and see what July 24 brings.
Two weeks ago I wrote that we'd see $500 before $700. I still
stand by that, but I'd be a buyer of this earnings machine with 70%
EPS growth this year anywhere near $550.
Currently trading just under 13X 2012 estimates, Apple is very
likely to bust through the $50 EPS mark next year with the launch
of new the iPhone5 and Apple TV. Which means it's trading for under
12X, to say nothing of its cash hoard.
What do you say about AAPL for either a trade or an investment?
Buy it now at $600 or wait for it to go on sale again?
APPLE INC (AAPL): Free Stock Analysis Report
CATERPILLAR INC (CAT): Free Stock Analysis
CUMMINS INC (CMI): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis
SPDR-SP 500 TR (SPY): ETF Research Reports
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