Monday, October 18, 2010

Apple (AAPL) Massively Overbought Going into Earnings

Long time readers will know the earnings game charade that Apple (AAPL) and the analyst community plays each quarter.  Apple beats their own guidance by a massive amount, then offers future guidance which is a joke... the analysts bump up their estimates over Apple's estimates by a small amount... the level of which of course Apple crushes in the following quarter.  Rinse. Wash. Repeat.

To that end I see Apple estimate for tonight at $4.06.  The range of 45 analysts is $3.43 to $4.43.   I used to be able to guestimate the Apple figure pretty well when I watched the quarterly report more closely, but I forgot the actual formula I used - essentially it was either to add a percentage over and above the median estimate, or over Apple's guidance.  Whatever the case we should expect a print near $4.40 give or take 5 cents.  That would be roughly a 20% beat versus analysts expectations.  At that time you act surprised, buy stocks in hand over fist function, while wiping saliva off your lip as the "Fast Money" crew goes to 24/7 hour coverage on the stock (versus the normal mentioning of it every 4th minute).

Year ago was $2.77 and the last 3 quarters have been a range of $3.33 to $3.67 so it's time to move that needle Mr. Jobs.

I don't recall if I've seen Apple be this overbought going into earnings but in this market overbought is just a state of mind; it means nothing to HAL9000... see silver for example.  I also don't recall the last time Apple sold off substantially on earnings (i.e. a 5%+ type of loss) - it has been that long.

Apple has a massive weighting on the NASDAQ, much like IBM has on the Dow (nearly 10%) - I highlighted IBM 2 weeks ago, and it has only continued to march on in non stop relentless fashion... buy high, and sell higher - HAL is definitely a momo trader.  IBM also reports tonight.

Party on Garth.

No position

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