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What’s Tim got Cook(in) over in the AAPL kitchen?

October 18, 2011

Let's hope so...

First: If you haven’t already, I think today is a good day to cash out your Sprint holdings. The run up over iPhone 4S hype is over and the downgrades will finally catch up with it.

Now, on to the second biggest story of the day (after GS earnings IMO): Apple reports Q4 earnings at 5PM EST

The big story here is not so much earnings, it’s guidance. Apple always guides VERY conservatively in order to beat each quarter. Therefore, I wouldn’t be surprised to see AAPL beat, with EPS somewhere in the $7.40-7.50 range. I anticipate slightly lower iPhone sales, as consumers were waiting for the iPhone 4S. However, lower material costs should boost profit margins. All in all, I don’t expect earnings to do much.

The conference call at 5PM EST is what will really drive this stock. I fully expect the guide conservatively protocol to remain in effect under Tim Cook. The key point of the conference call, the make or break point, will be a discussion of China. Any indication of Apple planning to make moves into the Chinese market will push this baby much higher.

Overall, I don’t feel comfortable owning this stock one way or another. Earnings won’t be a huge surprise, but if you believe strongly that Apple will talk China or no longer guide conservatively without Mr. Jobs, there could be easy money to be made. If I were to play this with a large amount of money, I would get short AAPL and pick up some in the money calls with 19 Nov. expiration.



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