Apple: What Great Recession?

Everybody’s favorite tech stock, Apple Inc. (AAPL), reported earnings after the bell Monday and handily beat estimates.  The beat was large enough to prompt CFO Peter Oppenheimer to exclaim that it was the company’s “best quarter ever.”

However, a good portion of the tech bellwether’s beat was due to accounting changes that were implemented to bring AAPL’s numbers in-line with a new FASB standard. Judging by the trading following the report, the Street was having a hard time figuring things out.

The raw data came in as EPS of $3.67 on $15.7 billion in revenue.  When compared to consensus estimates of $2.07 / share on $12.06 billion in revenue, we can see why Oppenheimer was so happy.  The confusing part is trying to tell how much of that revenue was a direct result of the accounting reform.  The new FASB standard, which allowed AAPL to recognize nearly all the revenue from its iPhone and Apple TV products up front, accounted for around half of the revenue beat according to some.

To perhaps allow for an interpretation of AAPL’s quarter disregarding any accounting changes, we can look to the actual product sales data.  For the quarter ended this past December, AAPL sold 3.36 million Macs, 21 million iPods and 8.7 million iPhones.  These numbers fall relatively in-line with analysts estimates, if not a tad higher on Macs and a tad lower on iPhones.  This is the likely reason for the unenthusiastic trading after-hours.  That, and the fact that every other big-cap tech name to crush earnings this quarter has traded down following their report, of course.

Technically speaking, AAPL’s chart is in a pretty interesting position.  After hitting a 52-week high on January 5th, shares began forming what appeared to be a short-term cup with handle pattern.  However, rather than forming a proper handle, shares broke down with the rest of the market towards the end of last week.  After piercing and closing below its 50-day moving average on Friday, shares re-took the line today, only to close just short of the mark.  Shares are currently trading at $204.90, above the 50-day, and good for a .9% post-report gain.  While a gain is indeed a gain, such is not necessarily the gain we would expect on AAPL’s “best quarter ever.”

The long line of great reports followed by, at best, cautious optimism seems to be reflecting an increasingly pessimistic tone on the Street.  If AAPL follows the suit of IBM, INTC and GOOG and sells off tomorrow, you would be wise to take notice.  Many insist the “the correction” is here, and you may want to lighten up your positions and allow the next couple of weeks to unfold before getting to deep into anything.    That said, if AAPL rallies hard tomorrow, be on the lookout for a follow-through day in the market, which would signal a likely end to our brief correction and, hopefully, a resumption of the uptrend.

Disclosure: No Holdings in AAPL, INTC, IBM, GOOG.

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