The Lato Letter: Volume 2, Issue 6.

The Lato Letter: Volume 2, Issue 6.

I appeared on Headline with Howard Green on BNN earlier this afternoon, prior to the release of Apple’s 2nd Quarter earnings release after the close today.

If you missed the show, here is the link to BNN’s website.

Some of the numbers that the market will be focusing on in the release for the 2nd quarter and the 3rd quarter are:

v2_i6_table

I believe that the decline in Apple since the last earnings report has been discounted into the current stock price, unless there is a huge disappointment in the 2Q results (earnings below the low end of Apple’s guidance). The key for the short term direction of the stock will be the 3Q guidance. In the short term, any disappointment from the current consensus could lead to further declines.

Longer term, however, the sentiment on Apple has become so negative that any positive catalyst over the next several weeks could have a dramatic impact on the stock price. Those catalysts could include any or all of the following; an increased quarterly dividend, a special dividend, a significant stock buy-back, an agreement with China Mobile increase penetration in China, a release of an enhanced iPhone or iPad or a revolutionary new product such as iTV or iWatch. With earnings estimates for 2013 already reduced from $51.00 per share a year ago to $43.29 today, Apple is trading at less than 10 times this year’s earnings. Any upward revision in those estimates would also bring an upward adjustment to the price/earnings multiple and a far more reasonable valuation for the stock.

The numbers will be out in a few hours and the stock will do what it will do but I continue to believe that longer term (as discussed in the BNN clip), the Apple story will continue and rewards to shareholders will resume.

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change without notice.

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