AAPL’s earning – the key is on the International Revenue

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Apr 21 2008
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Apple Inc.’s (Nasdaq: AAPL, stock) coming earning announcement is on Wed, 23rd Apr 2008 – two days away. Since Google’s sudden quantum leap, Apple has been having free ride up the hill. I mentioned if Google were to drop, then it would drag Apple and most of the technology stocks with it and vice-versa. I was trying to scalp and hope to squeeze some money out of Apple last Friday but it didn’t get triggered until today. And so the money was off the table for AAPL Jul 160 Call Option.

AAPL ProfitAbout three months ago when Apple announced its first-quarter earnings, the stock was punished and whacked left, right and center by investors despite posted the best earnings in its 32-year history. The stock was then tumbled to less than $120 a share before recovers, remember those days. But you might argue that it was due to recession fears and Apple’s pathetic guidance for Q2 of about 94 cents against analysts’ expectation of $1.09 a share. Could that be the strategy to lower analysts’ appetite for Q2 earnings? Your guess is as good as mine.

AAPL 6 months chartIf you were to ask most analysts or investors / punters / speculators, majority of them are bullish about the Q2 earnings (this Wednesday). IDC reported that Apple’s computer shipments were up 25.1% although overall U.S. PC sales were a mere 3%. Gartner said Mac sales up 32.5% instead. Since Google’s earnings announcement last week, you can’t ignore the international sales factor. Assuming Apple’s international performance is good, the company should easily beat the Street’s consensus of 1.95 million Macs sold in the quarter. Analysts are equally bullish with Piper Jaffray looking at Mac sales of 2-2.1 million while JP Morgan expects a higher figure at 2.11 million.

In terms of iPods, JP Morgan estimates that Apple sold 9.68 million units in Q2 while Piper Jaffray is betting between 9.7-10.5 million units. While iPods sales are so-so, iPhone sales are sending both JP Morgan and Piper Jaffray scratching their heads as the gadget was affected by shortages and black market in developing countries. JP Morgan thinks Apple to report sales of 1.5 million iPhones but Piper Jaffray believes the number could reach 2 million.

Nevertheless there’s one intangible consideration that I think is worth to ponder upon. It’s the “expectation” – a magic variable that contributed to the Google Inc.’s (Nasdaq: GOOG, stock) huge gap-up last Friday. Generally people were not having high hope on Google, hence when it reported a “nice” number the stock was bid up. Putting Apple into the same context, what’s the expectation of Apple? I doubt Apple could stage another equivalent gap-up even if it presents a set of good numbers. Furthermore Google’s effect has push up Apple’s stock since then. All the eyeballs are staring at Apple’s sales figure for Q2, guidance for Q3 and other goodies in the bag.

AAPL May Option bid-upAnyway, I’m bullish on the stock and if it’s true that Apple intentionally gave a lower guidance in Q1 and manipulated the iPhones inventories both in U.S. and Europe, there’s even more reasons to bet on the Call Option. Another reason that you might want to consider – Apple’s Call Option was bid-up pretty badly for May 160 up to May 210. On the other side, the Put Option was bid-up also for May 145 up to May 120. This is really exciting!

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