Apple Inc. (AAPL) rose 3.55% to $204.78 after hours ahead of its first-quarter of fiscal 2010 earnings. The company will report earnings today after the market close. As per the Zacks Consensus Estimate, Apple’s earnings are expected to increase 17% to $2.08 in the first quarter from $1.78 in the year-ago period.
Apple is widely recognized as a leading innovator in the personal computer and consumer electronics markets as well as a leader in the emerging market for the distribution of digital content. Apple is expected to introduce a new tablet device with a shipping date in March, which could drive the fortunes of the company.
Apple has experienced tremendous growth, driven by the success of its iPhone and increased Mac shipments. The company reported strong 2009 results with year-over-year increases in revenue and earnings of 12.5% and 17.4%, respectively, despite the recession. The fourth quarter results beat the Zacks Consensus Estimate and the company’s own guidance. Apple is currently benefiting from a positive mix shift to the higher-margin iPhone/iPod business from its traditional MP3 players.
The Macintosh product continues to gain market share, with significant gains in portables, music players and smart phones. However, the smartphone market is heating up and the company faces tough competition from Nokia Corp. (NOK), Palm Inc. (PALM) and Research in Motion (RIMM).
For the first quarter of fiscal 2010, Apple provided revenue guidance in the range of $11.3 billion to $11.6 billion in the fourth quarter earnings release. Earnings are expected in the range of $1.70 to $1.78 per share. While this is much below the Zacks Consensus Estimate of $2.08, the company traditionally gives extremely conservative guidance.
Fourteen out of 36 analysts raised their estimates for the upcoming quarter in the last 30 days, with no downward revision. Apple surpassed the Zacks Consensus estimate in each of the last four quarters, posting an average surprise of 23.46%.
We expect the company to report stronger results in fiscal 2010. While Apple has various positive attributes, we believe that the company’s strong growth has already been priced into its shares, although momentum could drive the shares slightly higher. Thus, we advise stockholders to hold the shares.
Read the full analyst report on “AAPL”
Read the full analyst report on “NOK”
Read the full analyst report on “PALM”
Read the full analyst report on “RIMM”
Zacks Investment Research
