Apple's Surge Showing The Signs Of Optimism


Back in February, following weeks of steady coverage focusing on Apple's fundamentals, I wrote that the Apple sell-off, which had taken shares from over $202 to around $119, seemed overdone.

I wrote then that investors seemed to be ignoring the product pipeline, the innovation Apple was bringing to the party, the market trends surrounding iPhone and particularly the Mac, the dramatic and ongoing shift to all kinds of digital entertainment, and the long-term opportunities that Apple enjoyed.

I said then that "like Google, the Apple sell-off is overdone. Plain and simple. And those investors buying into the panic are missing the true buying opportunity ahead...Makes no sense to me. And a year from now you gotta wonder whether this was the time when investors should have been buying." I'm not saying Apple will explode like Googledid last week, but it looks interesting.

So here we are, close to Apple's earnings, and the stock is surging. Those days of $119 are a distant memory with Apple knocking up against $170. RBC Capital is out with a note this morning increasing its target to $190 from $175, and increasing its EPS target to $1.11 on $7.02 billion in revenue, both categories well ahead of the Thomson consensus.

The increases come from analyst Mike Abramsky who says channel checks and other data suggest Apple shipped a whopping 2.2 million Macs during the quarter, or a 46 percent year over year increase. He also estimates 1.8 million iPhones sold during the quarter, for a total of 5.5 million so far. That puts the company on track to beat its stated sales goal of 10 million iPhones sold during 2008.

IPod shipments might be slowing down, but as that product line continues to move through a transition, any revenue hit from that category should be more than offset by robust iPhone and Mac sales.

Again, as I've written regularly, and most recently in February, investors need to tune out the noise and focus on the fundamentals--and not go overboard. Fundamentals look strong. As they have for the past year. The sell-off earlier this year made no sense to me then; it makes no sense to me now. Apple reports on Wednesday. I'll have a more formal earnings preview coming up in a later post.

Questions? Comments?