Every time Apple's (AAPL) earnings report comes into focus I'm left feeling violated. Apple often will dominate the headlines the week before it reports, quietly overshadowing industrial and old line tech earnings. It then tends to become more of a hotly-debated topic in the hours leading up to the release. Then, poof, its numbers and guidance hit and it's onward to the next topic.
I am always yearning for more information at the outset from Apple's rather brief 8-K SEC form. For a company supposedly on a trajectory to sport a $1 trillion market capitalization, shouldn't it be issuing bank-like, 20-page quarterlies? Or does the template of the 8-K exist to align with the slick, simplistic look of any Apple products post-2006? Who knows? What I do know is that, in the wake of a mega-blowout three months, there are two questions to consider -- and think quickly, as the Bernanke press conference begins a little after 2 p.m. EDT.
Should you buy Apple shares?
Is that too simple a question? Should I be inflating it with terms such as "discounted cash flow" and "back-of-the-envelope math" and "ASPs are driving GM (GM)?"
No, analysis could be as simple as tooling around on an iPad 2 Safari web browser or on iTunes. Apple has effectively rebelled against Wall Street's snowballing pessimism that originally surfaced out of the blue, and that should reset the minds of nervous nellies. The latter spent the night kicking themselves in the rear for allowing a newly formed consensus -- the anti-Apple mob -- to sway their fundamental analysis. These stewards of client assets are now resigned to marking their estimates back upward, perhaps overcompensating for errors in forecasting, and having to chase Apple shares so as to not get left in the dust on a performance basis. This is the first reason to return to Apple, if you'd been shaken out by Tuesday afternoon.
The second part of the equation -- and something with which I am wrestling, given that I suggested being "long and strong" Apple into earnings -- is whether to stay exposed to the reemergence of Apple bullishness or to cut bait. I, too, found myself modeling for stronger Apple future earnings than previously planned following the announcement. That means other already bullish estimates on the Street are likely to follow suit in light of upside in iPhone and iPod sales, as well as in gross margins. Higher estimates overall, supported by those near-term bears and those unshaken Apple bulls, seem to justify assigning a richer multiple on the stock and projecting a renewed uptrend.
Does Apple's mega blowout quarter have broader market implications?
Don't travel to New York and attempt to kick me in the face for uttering this, but I believe the answer is "no." Technically, yes, a rise in Apple shares will throw weight behind the major indices and spark sympathy buying in names leveraged to Cupertino mania, such as Broadcom (BRCM) and Corning (GLW). As I indicated Tuesday, I choose to place greater emphasis on an earnings report such as that of Norfolk Southern (NSC) -- which sported good figures, but had a stench of "unsustainable" as has become commonplace this earnings season -- or a solid dividend increase from old school tech name IBM (IBM).
In this regard, it was disappointing to see ho-hum market responses to beats and generally positive comments from U.S. Steel (X) and AK Steel (AKS) Tuesday. I have not been a fan of the major steel stocks this year, as a couple of subscribers who were nice enough to contact me will attest to. However, with the massive selloffs front and center, and given better-than-expected earnings, there should have been more "oomph" to the stock prices. The fact that the market continues to lack "oomph" is a thought now starting to evolve into a consensus amongst forecasts which, up until last week, were trying to validate bullishness by statistics accumulated from late 2011 -- and not present reality.
I sure wish second-quarter earnings season were upon us, as the themes in this one are becoming a tad boring. There's been good stuff with Apple, but bring on Bernanke.
• General Electric (GE) is continuing to climb steps following its earnings. I can't say the same for banks that compete with GE Capital and industrials that compete with the tons of businesses GE operates.
• W.W. Grainger (GWW) is a worthy example of good financials not being good enough. Its post-earnings chart has been ugly.
• I'm looking for leaders to lead, and it's failing to happen. Leaders I am watching include PriceSmart (PSMT), Ulta Salon (ULTA), Vitamin Shoppe (VSI), Polo Ralph Lauren (RL), Nike (NKE), Lululemon (LULU), and JPMorgan Chase (JPM).
More on Apple: