Apple Update: Q4 Earnings Report

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Apple reported Q4 2012 earnings Thursday with revenue of $36 billion was right on target, but EPS of $8.76 was lower than the expected $8.81 (although Apple’s own guidance was for EPS of $7.65). Also worrying investors was Apple’s forecast for the next quarter: EPS of $11.75 on revenue of $52 billion, both also lower than had been expected.

The stock peaked at $700 last September and had declined $70 already prior to earnings. Then Friday came within a few points of testing it's 200 day moving average.

Investors are getting worried with two consecutive quarterly misses. Why the slipping profit margins, and why the lower-than-expected revenue in the next quarter despite a slew of new products? Is demand waning for iPhones, iPads and Macs?

For Apple it's not a 'demand' issue but instead a supply problem, which most companies wish they had! Actually, that huge array of new products announced and/or released this quarter is a primary reason behind the slipping numbers. During the earnings call, Tim Cook stated that this has been Apple’s most prolific quarter ever in terms of new product releases. Key Apple gear went on sale in Q4, including the highly anticipated iPhone 5, a collection of new iPods and a class-leading Retina display 15-inch MacBook Pro. As the quarter wrapped up, Apple announced the iPad Mini, another Retina MacBook Pro, a new full-size iPad, an updated Mac Mini and a redesigned iMac that pushes the envelope for a consumer-level desktop PC.

All of these new products entail ramp-up costs, and Apple’s continued focus on cutting-edge design appears to be leading to higher production costs, regardless of any favorable supply and manufacturing terms Apple may have negotiated. Even though the latest round of new products may not go on sale until the next quarter, in most cases Apple has been producing them through Q3, building up a sufficient quantity to meet launch demand.

As the company approaches the final two months of the year, the oldest product for sale in Apple’s mobile lineup will be the 15-inch MacBook Pro with Retina display, which has been on the market for a mere four months. Apple is also selling an iPhone 5 and iPod Touch and nano that are just one month old, and November and December will bring a brand new iPad, iPad mini, iMac and Retina 13-inch MacBook Pro. It’s probably the biggest single product turnover Apple has ever done in such a short amount of time.

Apple is stressing that accepting lower margins and being behind on production is only temporary and that it plans to get its costs down as soon as possible.

ITZ believes Tim Cook has set a low bar on Apple's upcoming quarter as well as the year ahead. They've mastered the art of sandbagging earnings estimates. What Apple is setting up instead is perhaps record sales and revenues, as shoppers find an array of new products to buy and upgrade. While at the same time Apple will see supply issues and cost diminish.

Three weeks ago ITZ gave a pre-earnings outlook LINK bringing down FY 2012 to $44.38, it actually ended up being $44.15. ITZ also called for a test of the 100 ma around $617...we saw a low yesterday of $592 close to it's 200 ma. But rallying and briefly up on the day before closing at $604.

ITZ maintains FY 2013 estimate eps of $57 & revenue of $220B for 2014 $64 eps & revenue of $240B. Let's not forget as noted in the last Apple post... it has $125 per share in cash and with the stock trading around $600 it is selling at 8.4xs ex-cash next years estimated earnings. ITZ maintains a 2013 price target of $850 or 15xs eps. Use this correction to BUY!

 

Apple Forecasts $52 Billion For Holiday Sales

S&P500 Breaks Trend

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Gold Oil Ratio (GOR)

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One of ITZ's indicators used in trading oil is the Gold Oil Ratio (GOR). In this weekly chart, it highlights that it is not an accurate timing indicator at times. We're seeing UCO decline here, ITZ believes a turnaround in crude oil prices is coming. Currently fundamentals are driving oil lower, as geopolitical issues have subsided for now.

Crude Oil Oversold

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Crude Oil selling off, ITZ is long Proshares Ultra Crude Oil (UCO) with an average cost basis of $30.63. The Gold Oil Ratio (GOR) on a weekly chart has been giving a BUY signal. chart

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WTI Crude Oil Heading To $98

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WTI Crude Oil is testing it's neckline around $92.50 on an Inverted Head & Shoulders. ITZ continues to be bullish on crude and has a $98 upside target. ITZ has used the Proshares Ultra Crude Oil ETF (UCO) on the long side and SCO on the short side.

ITZ Portfolio Update 10-15-12

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Position Update:

Silver Wheaton (SLW) 1/2 position 4/17 $30, 1/4 position 5/8 $26.75 & 1/4 position 5/9 $26.75
  Current stop levels are- 1/4 position @ $36 & 1/2 position @ $35 chart

Apple (AAPL) 1/4 position 4/24 $559 / 1/4 position 5/17 $539 / 1/4 position @ $588 on 7/23 & 1/4 position $572 on 7/25
Stopped out October 8th @ $646.75 against April 24th entry of $559 for $87.75 net gain (+15.7%)
Reentered October 9th @ $626 1/4 position (Full position ) chart

Halliburton (HAL) 1/4 position 10/3/12 @ $33 chart


Proshares Ultra Crude Oil (UCO) 1/4 position on 9/19 @ $32, 1/4 on 9/19 @ $31 Hold, purchases on Sept 26th $30 & Oct 3rd $29.60 were stopped out on Oct 5th $30.35 for $0.55 (+1.85%) chart
Hold current position look to re-enter recently exited 1/2 position

Oct 15th reentered 1/2 position @ $29.75 (currently full position)

 ITZ has been in & out of this trade follow suggested trades on Twitter

ITZ Chart Updates

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ITZ remains bullish on the market and suggests this pullback should be bought.

ITZ Portfolio Update 10-8-12

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Position Update:Silver Wheaton (SLW) 1/2 position 4/17 $30, 1/4 position 5/8 $26.75 & 1/4 position 5/9 $26.75
 Raise STOP from $33 to 1/4position @ $37- This was hit on 9/25 against 5/9/12 purchase of $26.75, netting $10.25 (+38.3%)

Current stop levels are- 1/4 position @ $36 & 1/2 position @ $35 chart

Freeport McMoran (FCX) 1/2 position 4/5 $38 & 5/14 $34.80 1/2 position --raise STOP from $34 to 1/2 position @ $41 & 1/2 @ $40 chart

Exited 1/2 position hit stop @ $41 for a $3 gain vs April 5th purchase @ $38 & $SBUX exits hitting $50 stop for a 97cent loss & Sept 28th exited 2nd half position @ $40, both positions netted a +11.26% gain

Apple (AAPL) 1/4 position 4/24 $559 / 1/4 position 5/17 $539 / 1/4 position @ $588 on 7/23 & 1/4 position $572 on 7/25 --Maintain STOP @ $650 on 1/4 position  chart


Qualcomm (QCOM) 1/4 position 4/24 $61.40 / 1/4 position $58.50 5/17 & 1/4 position @ $57 on 5/17 --Raise Stop from  $60 to $62 chart

Update 10/2/12 QCOM hit stop exited @ $62 for a 5.1% gain, look to re-enter around 200ma

Starbucks (SBUX) 1/2 position 5/10 $52.50 & 1/4 @ $43.90 on 8/6 -- Raise STOP from $49 to $50 chart

Hit stop $50 exited with with a small gain

Proshares Ultra Crude Oil (UCO) 1/4 position on 9/19 @ $32, 1/4 on 9/19 @ $31 Hold, purchases on Sept 26th $30 & Oct 3rd $29.60 were stopped out on Oct 5th $30.35 for $0.55 (+1.85%) chart
Hold current position look to re-enter recently exited 1/2 position

 ITZ has been in & out of this trade follow suggested trades on Twitter

Apple Pre-Earnings Outlook 10-6-12

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It's hard to believe that it has been one year since Steve Jobs' death. Many have questioned if Apple could survive without him, the stock is up 79% in that period.

In less than 3 weeks Apple will report Q4 2012 earning, which closed last Saturday, Sept. 29 -- expectations are that they'll be even weaker than Q3 earnings.

As CEO Tim Cook explained to analysts last July, Q3's earnings were reduced by customers who put off buying an iPhone after reading press reports that Apple was working on a new model. Apple analysts -- anticipating that the iPhone 5, like the iPhone 4S, would be released in October -- lowered their earnings estimates for the September quarter. But Tim Cook surprised everyone by releasing the IPhone on Sept 21, or 9 days of sales that will fall into fiscal 2012.

In 2012 Q1 earnings estimates called for $10.21 per share, actual $13.87; Q2 $10.21 est actual $13.87; Q3 $10.39 est actual missed $9.32...now Q4 $8.89 est. Bring it to $44.38, ITZ estimate FY 2012 was for $50 and @ 15 times p/e a $750 year end price target. If earnings come in at current estimates we should have a $44.38 FY and at 15 times a $665 target, which is we're at currently.

Apple has stumbled near term with its maps roll out. Even the move to swap out Google Maps has Jobs' fingerprints all over it. Jobs was known as someone who had come to hate Google and Android. But new products continue to roll out, new iPad, iPhone 5, now iPad Mini & perhaps iTV? Jobs ideas and plans have definitely packed the pipeline for years to come.

One other financial note, most focus on earnings...but neglect the fact that Apple has $117 Billion in cash and investment assets, making it the largest hedge fund in the world, Braeburn Capital. LINK That's $125 in cash per share or 19% of its closing share price of $652.59 , which also yield 1.6%.

So is Apple a sell here or a buy? It just closed under it's 50 day moving average Friday. Analysts have been calling $650 a key psychological level. ITZ technical levels are $640, the April 10th high, after that the 100 day moving average around $617. That places Apple at the 61.8% Fibonacci Retracement from the July low $567 - Sept. high $706.

One has to look forward and Q1 2013 should be a very strong quarter as holiday sales kick in. ITZ suggests using any pullback here to either buy and or add to positions. ITZ is revising the earnings outlook for 2012 from $50 to $45 per share & $57 for 2013 with a price target of $850. Previous ITZ Post

Gold Oil Ratio Daily/Weekly

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Crude Oil Sell Off - Opportunity To Get Long UCO

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ITZ has been suggesting Proshares Ultra Crude Oil (UCO) for the last 3 weeks. Entering 1/4 positions on Sept 19th @ $32 & $31, on Sept 26th @ $30 & today @ $29.60 (Twitter alert) those who follow blog would've gotten in @ $29. The ETF closed today @ $28.48.

WTI Crude Oil took a hit as technicals & news out of China slowing down. ITZ has noted since crude broke below an ascending channel on an 8 hour chart that Fibonacci Retracements would be tested. June/Sept $86.18 = 61.8%.... we may see that soon.

In the chart below ITZ uses the GOR 'Gold/Oil Ratio' against the Proshares long oil etf UCO. On a weekly chart, when the Stochastics & RSI rise above 80 & reverse lower it signals BUY UCO. This is not a pinpoint signal and by no means the only indicator we track, but it has been fairly accurate on both long & short positions in oil.

 

Oil Services OIH

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