Apple Earnings Preview

Apple (AAPL: 190.87 +0.21%) is scheduled to report their fiscal fourth quarter 2009 results after the market closes on Monday, October 19. Based on our analysis, we at EarningsPreviews.com are expecting AAPL to report better than expected quarterly results that will exceed Wall Street’s consensus expectations.

Analyst Expectations

We are forecasting revenues of $9.21 billion and EPS of $1.49. This would represent a 17% increase in revenues from last year’s $7.90 billion in the same period. The current analyst consensus estimates calls for revenues of $9.13 billion and EPS of $1.40. On July 21, the company provided revenue guidance of $8.7 - $8.9 billion and $1.18 - $1.23 EPS.

We are anticipating another blowout quarter from Apple that will easily exceed both Wall Street’s consensus expectations as well as the company own notoriously-conservative guidance. With a global economic recovery seemingly imminent, investors are growing increasingly confident in Apple’s performance. The stock is now trading near their 52-week high and will likely top $200 following their earnings report.

Apple continues to make innovative products that consumers want to buy. The Apple iphone continues to grow in popularity and we expect increasing adoption over the next few years as Apple moves away from its exclusive relationship with AT&T (T: 25.7115 +0.20%). In addition, there is anticipation building over new products that Apple may release in 2010 including a rumored Apple tablet.

Share Performance

Since the beginning of the year, Apple’s shares have jumped 123%. In 2008, AAPL’s shares fell 57% and actually underperformed the 34% decline in the Dow Jones industrial average.

Valuation

Shares are now trading at 27x consensus 2010 EPS estimates. This is above the relative valuations of their peer group. Apple is one stock that clearly deserves to trade at a premium and we expect that a strong quarterly performance will likely cause analysts to raise their 2010 estimates which should lift the stock even higher.

Recommendation: Buy with a $215 price target

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