Investors Await Apple’s Earnings on Tuesday

Earnings season is now well under-way with major tech companies reporting results.  Shares of Intel (NASDAQ:INTC), Microsoft (NASDAQ:MSFT) and International Business Machines (NYSE:IBM) all received a boost on Friday due to impressive earnings.  However, all eyes will be on Apple Inc. (NASDAQ:AAPL) as the company reports earnings on Tuesday.

Shares of Apple hit a fresh all-time high of $431.37 on Thursday, but declined to $420.30 by the end of the week.  Last quarter, Apple posted lower-than expected sales of iPhones as customers postponed their iPhone purchases in anticipation of the new iPhone 4S.  The lower sales caused Apple to report its first profit miss in at least six years.  Shares traded down to as low as $363.32 in November.  However, analyst are now expecting an impressive quarter from Apple.

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The average estimate of analysts is for profit of $9.98 per share, a rise of 55.2% from the company’s actual earnings for the same quarter a year ago. During the past three months, the average estimate has moved up from $9.64.  Earnings should receive a large boost from iPhone 4S, which saw record sales of 4 million units in the very first weekend of its launch.  U.S. wireless carriers such as Verizon (NYSE:VZ), Sprint (NYSE:S) and AT&T (NYSE:T) are also indicating strong sale numbers of the iPhone 4S.  “Interest continues to be very high,” said Michelle Mermelstein, a Sprint spokeswoman. “We are working closely with Apple to meet the demand.”

Overall, analysts are bullish on Apple with 39 analysts rating it as a buy, and zero rating it as a sell.  Even though Apple’s iPad 2 may see sales weaken due to new tablets from Amazon (NASDAQ:AMZN) and Barnes & Noble (NYSE:BKS), analysts predict an average of $38.65 billion in revenue this quarter, an increase of 44.5% from the year ago quarter.  While an earnings miss or disappointing iPhone 4S numbers could easily send Apple shares back below $400, shares still have plenty of upside this year.  The median price target on shares is $515.

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On Thursday, Apple introduced a service to make digital versions of textbooks available on the iPad in an effort to boost the tablet’s popularity in the classroom.  Apple’s new tools are intended to stimulate the nascent electronic-textbook business by enabling a broader range of authors to make material available to students in a digital format. In turn, Apple hopes to American will make the iPad its e-textbook reader of choice.  Pearson (NYSE:PSO) and McGraw-Hill (NYSE:MHP), which account for 90 percent of all textbook sales, are Apple’s partners in the new product. Most books will be priced at $14.99 or less.  The goal of the new application is to sell more devices, says said Sarah Rotman Epps, an analyst at Forrester Research. “Sales will only go up as the amount of quality content increases.”

To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com