It's time for Apple
Apple reports earnings after market close tonight, and the gadget guru has everything to prove. This stock has been on fire in 2009, doubling in price since New Year's Eve and challenging all-time highs again after recovering from last year's market meltdown. With a $167 billion market cap, Apple has surpassed giant businesses like Johnson & Johnson
But Apple's business is facing challenges it has never seen before. Amazon.com
Plenty of cell phones double as media players these days. The iPhone is still going strong there, but Google
Add it all up, and we may be looking at Apple's zenith today. The just-completed fourth quarter saw the same challenges in weaker incarnations. The iPhone 3GS should present record-breaking sales and profits this time around, and a strong back-to-school season probably did the same for the Macintosh division. But come next quarter, we'll see the Android scaling up to challenge the iPhone for real. Will teens and hipsters everywhere keep asking for an iPod for Christmas -- or might their roving eyes turn to new toys?
Apple itself must be aware of these threats, and will probably set its next-quarter guidance on a beatably modest level. Apple has beaten every earnings target since the first quarter of 2003, and it won’t break that streak any time soon. But low-key guidance often drowns out even raucously strong results. The recent run-up in Apple's stock may have set investor expectations impossibly high. This could be your last chance to take some profits off the table -- and buy back again when the market has reset its expectations. Apple is by no means dead in the water, but it may be a while until we see a P/E ratio in the 30s again.
Think I'm wrong? My flame-retardant suit just came back from the cleaner, so feel free to fire away in the comments below. Nodding in agreement is fine too, of course.