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Can Apple Repeat Its Spectacular Earnings Performance?


If three upcoming product launches are as successful as they can be, expect history to repeat itself in earnings season in January 2013.


What kind of a financial blogger would I be if I didn't write about Apple's (AAPL) recent earnings release this week? It was a blowout quarter rarely seen by any firm. The company beat the consensus revenue number for the quarter by more than $7 billion. That's 7 billion!! Less than 5% of all publicly traded firms even have $7 billion of total annual revenue. Amazing.

Apple deserves all of the kudos it has gotten this week. It isa great company. The earnings blowout was driven by impressive product sales. Apple designs and builds great consumer products that are loved by their users. We all know that the world loves the iPad, iPod, and iPhones. But the iMac and laptop numbers continue to impress also. More and more people are adapting the entire Apple ecosystem as they surround themselves with Apple mobile products.

I have a running joke with my fellow blogger on Buy & Hedge about Apple's future. If you are a fan of science fiction movies, then you know a lot of them have a consistent theme: Some large company now controls the entire infrastructure of the Earth/galaxy/universe -- the food, water, oxygen, robots, etc. The whole world is dependent on the company. And usually that company has some plot twist that involves the CEO/founder/creator wielding too much power. I would argue that if that is our future here on Earth, more than likely Apple will be that company.

But let's look at Apple's more immediate future for a minute. Specifically, can Apple do this again? That earnings beat was so good that it seems that it would be difficult. First, let's level set the expectations. The first quarter is the December/holiday quarter, which is always Apple's best quarter because of the gift-giving season.

The question is: can Apple have a blowout that beats revenue or earnings or product sales numbers by the similar scope as just happened last quarter? In other words, $3+ billion revenue beat on consensus or earnings per share beat by 30%+ or product sales that are up 100% over the prior year quarter?

Seems unlikely for the next three quarters given the likely product push coming for Apple this year, which I'll speculate on in a minute. But could it happen again by the December ending quarter for 2012?

In 2012, I expect Apple to make 3 significant product pushes that I think will have a lot of potential:

  • New iPhone that has 4G data and potentially thinner form factor

  • New iPad that has 4G data and potentially faster processor and sharper screen

  • New Apple TV launch in actual TV form or just new innovative set-top box

If all three of these things happen in 2012, then I could see Apple's December 2012 quarter being a repeat of this last quarter. These three product pushes together could be the impetus for a blowout final quarter. These products will also continue to strengthen the already growing movement of conversion from Windows PCs to Mac computers.

Also, I expect the telecom providers to make a move to allow users to combine data plans across devices to share a 4G plan; in other words, your 4G data usage would be calculated across your iPhone and iPad together. This will help make more users upgrade from earlier iPads and iPhones.

These launches will most likely be staggered through the year – which is why I don't expect any one of these product pushes to cause a blowout quarter on its own. But the combination of all three before the holiday season is another matter completely.

So, expect Apple stock to have an interesting 2012 – and if these three product launches are as successful as I think they can be – expect history to repeat itself in earnings season in January 2013.

For more from Wayne Ferbert, go to Buy & Hedge ETF Strategies.

Click Here to Purchase "Buy and Hedge: The 5 Iron Rules for Investing Over the Long Term" by Jay Pestrichelli and Wayne Ferbert
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No positions in stocks mentioned.
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