Apple (AAPL, $91.49, down $6.95) reported earnings after the bell Tuesday and they pretty much followed the script we had written. Yeap, Apple knocked the cover off the ball as it reported a 25% jump in quarterly profits. The company reported earnings of $1.1 billion, or $1.26 a share, versus $904 million, or $1.01 in the year-ago period. Wall Street was expecting $1.11 a share. Revenue came in at $7.9 billion which was just shy of the $8 billion Wall Street had predicted.
Now for the bigger story. They were expected to do 2.9 million in Macs sold, 4.5 million for iPhones and 10.5 million in iPods. Apple did 2.6 million Macs, 11.1 million iPods and…6.9 million iPhones. (I knew that Atlantic City trip would pay off. I saw multiple iPhones at every poker table). How big was the iPhone number?
Research in Motion (RIMM, $50.53, down $3.38) reported that it sold 6.1 million BlackBerry smart phones in its quarter. Not only did Apple knock-out the 800-pound gorilla of the smart-phone market, they did it Buster Douglas style. Although James “Buster” Douglas delivered one of the most shocking upsets in sports history, his stay on top was short lived as he lost his next fight and retired. I doubt Apple will suffer the same fate as the company looks prepared to defend its title for many years to come. RIMM is right at 52-week lows.
The problem with Apple’s report was its guidance going forward. I told you they would sandbag and that they did. Here is the cat-and-mouse Wall Street and corporate America play…Apple expects to earn $1.06-$1.35 a share on sales from $9-$10 billion. That is a 29 cent and a billion dollar range. Wall Street had been expecting $1.65/ $10.57 billion. Geez.
The guidance is what may have spooked traders as the stock started the after-hour session lower as it traded in the $80’s. However, things quickly turned around as buyers started flocking in. Maybe Apple in the $80’s was just what the bulls were looking for. The stock finished after-hours trading at $103.61, up $12.12.
That is why there is so much risk trading around earnings. Although Apple looks like it may open over $100, the guidance could have wrecked havoc on any call positions if buyers didn’t step in last night. Yeah, I was more bullish than bearish on Apple but I told you that the guidance would be lowered and it would depend on how Wall Street reacts. That’s a 50/50 flip in this market. I was calling for a one or two-day rally and we might get it. But even if Apple opens at $102 or $103, it will still be trading under last week’s high of $116.
There will be a time when Apple provides us with another trading opportunity but let’s wait until we see a clearer trend. Right now there is still too much “choppiness” going on in this one.
Oh yeah. The dude that Buster beat? Mike Tyson. The dude that beat Buster? Evander Holyfield.
Rick Rouse
Rick@OptionsMentoring.com
