Earnings Preview: Apple Is Primed to Shine

It's easily one of the most anticipated earnings reports of the season, and Apple is primed to shine.

Apple Earnings
Apple Earnings

True enough that the first calendar quarter sees a marked drop-off in business for Apple , since the holiday shopping season is so critical to this company. But that doesn't mean there's any less excitement ahead.

The Street is looking for $2.43 a share on $12 billion in revenue.

Other key numbers to watch: 2.9 million Macs sold, though after the NPD market research report, there's some concern that Apple might disappoint here. I'm not buying it. If Mac sales slowed in March, as the report suggests, it was likely because of all the attention lavished on iPad. And with new portables unveiled last week, I'd be surprised if Apple doesn't easily reclaim its Mac mojo, and quickly.

iPhone should have sold about 7.5 million units during the quarter. iPod should hit about 10 million units. We'll likely get an update on iPad's sales progress, but because of its April release, it won't have any direct affect on earnings tonight. And news just this morning that the 3G version will be released on April 30, and not May 7 as feared lately, bodes well for Apple's current quarter.

Looking out to the current quarter, the Street's at $2.65 and $12.9 billion. Apple always does a guidance dance, so the real question is how down the company downplays expectations. Most on the Street are wise to Apple's game, and the company almost always disappoints.

But with iPad selling so well, and new iPhones on the way in June, it's getting harder and harder for Apple to dampen expectations. I think the company's guidance tonight will still be tepid, but far less so than in quarters past, and that bodes well for investors.

Today we'll get a snapshot of Apple once again, and we'll examine the numbers inside and out. What we'll find should come as no surprise to anyone following this company and the trends upon which it is seizing.

The fundamentals at Apple are the envy of just about every company in business today: it can't build its products fast enough. It sells what it ships. Its margins should reach 40 percent and its cash position could swell to $40 billion. Tens of millions of shoppers visit its retail stores, many of whom actually buy something before they leave. Even at $248 a share, on a relative basis and against the growth Apple manages to post, the company's stock isn't expensive.

Even at these levels, Apple seems to be such a better value proposition than anyone else with whom it competes. Research in Motion does well with the Blackberry, but that's all there is. Google does well with Search but for now that's all there is. Microsoft does exceptionally well with software but that's all there is. All of Apple's competitors are huge, and successful, and innovative, and offer great stories.

But none offers the diversified product portfolio of Apple's hardware, software, and retail, and the payroll talent to take advantage of it all. And that's why Apple commands the premium it does, and why that premium still has a ways to go based on the multiples at which Apple's competitors trade.

Say what you will about Apple's maniacal focus on secrecy, the weird, intimidating management style of Steve Jobs, the unfamiliar and insular corporate culture on campus in Cupertino. This company continues to innovate, drives competition, creates, pushes forward, prints money like no one else, and in this ends-justifies-the-means world of ours, sits all alone on a perch of success just about everyone else is trying to achieve.

Apple doesn't get a free pass. It has to perform. It has to meet or beat expectations. When it slips it will feel the pain. It can't break the law. Like a shark, it can't just stop moving or it will die, even though living off the interest of its cash position alone would make it one of the most profitable companies around. But that's just it, Apple isn't at risk of stopping, or slowing down. In fact, it's accelerating.

Those who sing Apple's praises get shuffled aside as "fanboys," swooned by the so-called reality distortion field. Forget all that: Focus on the fundamentals, financially and otherwise and there's nothing distorted about Apple's success. It's very real, very profitable, and because of the markets and trends Apple serves—and owns, and has only just begun.

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