The Edge: New Technology Drives the Backbone of our Innovative System

The Trading Edge with Derek HoffmanOn Tuesday morning, January 19th, I spoke to CNNMoney during the pre-markets and said we were in for “somewhat of a reality check” as a slew of bank earnings reports were slated for release. The markets were at their highs for the year.

Fast forward to today, and the DOW and S&P are in negative territory for 2010, Bernanke is continuing to keep the printing presses roaring as he wins his 2nd term, Obama is calling for financial reform (broken record), and economic reports continue to disappoint (i.e. jobless claims rising and housing sales declining).

One bright spot amidst all the bad news is innovation and technology companies that are the cream-of-the-crop performers so far in 2010.

Today, I breakdown earnings from three leaders in the technology sector: Apple (AAPL), Amazon (AMZN) and Microsoft (MSFT) …

Apple (AAPL): The iPod, iMac, iPhone and now iPad. But will the iPad be a winner at $499?

Earnings Info: Earned $3.67 per share, compared to $2.50 per share in the same quarter a year ago. Analysts were expecting $2.07 per share, a huge upside surprise.

Revenue jumped 32% to $15.68 billion, beating analyst expectations of $12.06 billion.

Comment: AAPL announced record earnings — its most profitable quarter in history. AAPL beat expectations with ease on both earnings and revenues. Everyone loved the iPod, the iPhone, and iMacs. Although questions remain around the iPad, given the successful track record and hot streak that Steve Jobs has been blazing during the ‘lost decade,’ Apple should continue to impress as a media company with a best-of-breed product line that just keeps expanding.

AMZN (AMZN): The Kindle is changing the game of book consumption.

Earnings Info: Earned $.85 per share this quarter, a 71% year increase in earnings compared to the same quarter a year ago. AMZN’s earnings beating analyst estimates of $.72 for the quarter.

Revenues skyrocketed 42% to $9.5 billion from a year ago.

CEO Jeff Bezos said, “We now sell 6 Kindle Books for every 10 physical books.”

Comment: Once again, AMZN proved they are here to stay and the Kindle is altering our world during the exciting shift in the book publishing landscape. AMZN was even bold enough to raise their forward outlook expectations above analyst estimates. Be careful they don’t inflate the balloon of estimates too fast too soon. AMZN has been known to not keep up with the outlooks it puts out to market, so ideally wait for pullbacks (if possible) as buying opportunities.

MSFT (MSFT): Windows 7 creates satisfied PC enthusiasts … making up for the VISTA buzz-kill.

Earnings Info: Earned $.74 per share compared to $.47 per share in the same period a year ago. Consensus estimates among analysts were $.60 per share in the quarter, so Microsoft beat expectations.

Revenue rose 14% to $19 billion from $16.6 billion quarter-over-quarter. Revenue jumped 70% in the Windows division due to the Windows 7 launch in October ’09.

Comment: Microsoft beat expectations on earnings, but missed on revenue growth. However, MSFT still managed to impress Wall Street with a double-digit revenue increase! MSFT said it still sees no signs of big companies increasing their spend on technology yet. MSFT is expected to release a new version of Office later this year, which will need to be a catalyst for the company as the ever-competitive Google is creeping up with improving business software.

Disclosure: No positions in the stocks mentioned.

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