It seems like every earnings season I focus on Apple as the stock and company to watch, but this time around there's an added dramatic flare in the return of Steve Jobs.
And it would seem by the action in Apple shares over the past week, there's big time optimism that this company will beat. Again. Of course when you see this kind of momentum into an earnings report, there's the buy-on-the-rumor-sell-on-the-news risk, but I'm not sure that's what's shaping up now.
That's because, as I have consistently reported before, that Apple isn't a momentum stock, but an investment in fundamentals. There is every indication that Mac, iPhone and iPod sales remain solid, and that the company's margins remain robust.
Nobody buys Apple's conservative estimates game any more. The Street expects $1.16 on $8.2 billion in revenue. Apple was way below that in guidance (95 cents to $1). And RBC is at $1.27 and $8.3 billion as an example.
But that EPS is predicated on gross margins of about 33 percent and there are plenty of compelling arguments that suggest they could be substantially higher. RBC Capital says actual margins could be in the 33 or 35 percent range thanks sales of higher margin iPhone and iPod Touch sales. Canaccord Research says 35 percent.
On a product to product basis, the Street expects 4.5 million to 5 million iPhones, though RBC projects 5.3 million iPhones to sell; iPod consensus ranges between 10 million and 11 million units; and on the Mac front, 2.3 million to 2.5 million.