Market Overview

Two Things to Watch for in Apple's Earnings Report

Apple (NASDAQ: AAPL) is set to report earnings after the bell on Wednesday. Analysts expect the company to report an earnings per share figure of $13.44 on revenue of $54.73 billion.

Investors will see if the fourth quarter of 2012 was better for the company than for its shareholders. Since peaking above $700 in September, shares have traded down nearly 30 percent.

When looking at the report later today, investors should keep their focus on iPhone sales and gross margin. Speculation about both may have been behind the selloff Apple shares have experienced.

Apple bears have harped on the possibility of disappointing iPhone sales this quarter. Since December, rumblings from Asian supply chain sources have indicated that demand for iPhone components is weaker than was expected.

Meanwhile, The Wall Street Journal reports that, of the iPhones being sold, much of them are the older 4 and 4S models, rather than the latest model, the iPhone 5.

This brings up the issue of margin. Specifically with iPhones, the older models likely net Apple a smaller profit as they are sold at reduced margins. Further, consumers who are price conscious enough to purchase the cheaper versions of the iPhone might similarly be less likely to spend money on apps and digital media from the iTunes store.

Expanding further on the point of margin, investors may get details on sales of Apple's new iPad Mini.

The Mini, sold at a lower price point, is thought to carry a smaller margin than the more expensive, full-size iPad. This led many analysts to declare the Mini a necessary evil -- necessary to defend Apple from a wave of smaller, cheaper competitors running Google's (NASDAQ: GOOG) Android; evil from perspective that it could lower Apple's gross margin.

There's even some speculation that the iPad may have been so successful as to nearly displace sales of the full-size iPad. This might be best for Apple over the longer-term, but could hurt profits in the current quarter.

Shares of Apple traded near $511 on Wednesday morning, up a bit over 1 percent.

Posted-In: Earnings News Previews Intraday Update Movers Tech Trading Ideas Best of Benzinga

 

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