Wednesday, October 19, 2011


INTC earnings often mark a turning point for the market, and AAPL is probably the most-loved stock in existence.

AAPL earnings are always an interesting exercise in psychology because everyone knows, without a doubt, the company will beat estimates -- it's just a matter of by how much. Over the last four quarters it has beaten by 13.7%, 19.1%, 19.2% and 33.6%, respectively. That last quarter was well ahead of the whisper number and the stock reacted strongly, even though it already had a straight up move going into the report.

For the fiscal fourth quarter, the average estimate is for earnings of $7.28 per share. I believe the market will be looking for that to be surpassed by 15% to 20%, which would be $8.37 to $8.73. Anything under $8.50 is likely to invite profit taking, especially since the stock has had a good run the last couple of weeks. The other thing to note is that AAPL is notorious for low-balling guidance, and that is expected, but any talk about growth slowing will be treated harshly.

AAPL management has been masterful in the way it has managed earnings, but that hurdle is quite high because it isn't possible to keep expectations low -- anything less than a great quarter will disappoint some.

INTC in some ways is a more important report than AAPL, as it tends to be a bellwether for the technology group. It was INTC earnings that kicked off the huge rally that started in 2009, and a poor report has marked bumpy earnings seasons in the past.

Like many other stocks, INTC has made a big move recently and is running into resistance, so the risk of a sell-the-news reaction is high. INTC typically beats by a few cents, but guidance is the key. A poor INTC report on the heels of IBM's disappointment last night will make for tough going in the technology sector.