Wall Street braces for Apple’s earnings report

“Wall Street is looking to Apple Inc’s quarterly results on Tuesday to settle the debate over whether the stock’s recent sell-off is a blip or an extended pullback,” Poornima Gupta reports for Reuters.

“If sales of iPhones and iPads blow past the market’s expectations, that could assuage concerns that Apple’s growth momentum is slowing. Such worries have caused the stock to fall 13 percent in the last two weeks,” Gupta reports. “But if the results disappoint, that will fuel fears of a slowdown in sales of its flagship products and about whether the world’s most valuable technology company can keep launching hit devices. On Tuesday, Apple’s stock was hovering around $560, off a record intraday level of $644 on April 10.”

“Analysts expect earnings of $10.04 a share on revenue of $36.8 billion in the second quarter ended in March, which implies sales growth of about 50 percent from the year-ago quarter, according to Thomson Reuters I/B/E/S,” Gupta reports. “Trades in the options market ahead of the earnings suggest that investors expect Apple shares to jump or fall by about 7.15 percent following the earnings. This would be a much larger movement than Apple’s average post-earnings stock move of about 4.25 percent in the past four quarters. The stock will rise if Apple manages to sell more than analysts’ consensus forecast of about 30 million-plus iPhones and 13 million iPads. Gross margins of about 43 percent or higher could also boost investor optimism.”

Gupta reports, “Sales of the iPhone – which accounted for about half of Apple’s revenue last quarter – is the key number investors will be watching. Any dissatisfaction there will weigh heavily on its stock, which has been mired in a two-week decline after quadrupling over the past 2-1/2 years. Weak iPhone numbers could cause more cautious investors to reevaluate their positions and cash in on some of their holdings.”

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