Apple Earnings Preview: Expect More Strong Numbers, Despite Criticism

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Apple Earnings Preview: Expect More Strong Numbers, Despite CriticismHeading toward Apple's (AAPL) Tuesday earnings report, it's probably worth acknowledging the obvious: Resistance is futile. Apple's business has never been stronger. Like The Borg, Apple is virtually impossible to defeat -- thanks in part to the fact that it consistently low-balls its earnings forecast. Needless to say, after posting the best results in its history last quarter, look for a yet another strong report.

The Star Trek uber-villains come to mind not just because Apple's erstwhile rival Microsoft used to be mockingly called The Borg, but because Apple's brand -- once almost synonymous with a kind of "Think Different" idealism -- is increasingly being cast in more malevolent hues for its increasingly closed system, aggressive tactics and almost cult-like secrecy.

But Apple shareholders can sleep soundly knowing the stock still has plenty of room to go up -- and most Wall Street analysts are betting it will. The median Wall Street price target for Apple is $280, according to Reuters. Last Friday, Apple's share briefly breached the $250 barrier.

Hudson Square Research analyst Daniel Ernst told Reuters that his Apple price target is $300. "The simple reason is growth," he said.

Generating Profits -- and Critics

Over the weekend, John Battelle, a technology author and co-organizer of the Web 2.0 Summit, posted an open letter to Apple saying, "We miss you," and warning about "what happens when large American corporations create cultures that worship secrecy and refuse to answer to the press. It's not pretty."

"Despite the gorgeous products and services you've created, we worry that you're headed down a road that may lead to your own demise," Battelle wrote. "Apple is no longer the underdog living in the shadow of a Microsoft [MSFT] monopoly. Increasingly, Apple is a dominant player in any number of critical network services and points of control -- from mobile devices to media access, payment systems to Internet browsing and advertising platforms. In short, we believe Apple is far too important to continue its role as the Howard Hughes of our industry."

As one of America's most iconic companies, Apple has a number of different constituencies: a deep base of self-identified "fan boys"; a larger, though less militant, pool of loyal users; the new customers the company is attracting in droves, thanks to the iPhone; and the press, which is alternatively worshipful and resentful of Steve Jobs & Co.'s success.

Wall Street Darling

But like any public company, Apple's most important constituencies are Wall Street and its shareholders. Early adopters, skeptics and pundits can argue about the company's products, but one thing is certain: Apple is crushing Wall Street. Its stock price has by risen by 100% over the last year, powered by impressive gains in virtually all of its business, from Mac computers to the iPhone.

Apple's unbelievably overhyped introduction of the iPad tablet computer represents an audacious attempt by Jobs to literally create a market where one did not exist before. If he's successful -- and the company shipped 500,000 units in the first week alone -- he will have opened an entirely new profit stream for Apple, both in terms of hardware and the twin pillars of the App Store and the new iAds mobile-advertising platform.

This all bodes very well for Apple shares, which is why most Wall Street analysts are bullish on Apple. But while the company has become a darling on the Street, its image has taken something of a beating in the tech community, especially among software developers who've chafed at the iron grip it has kept over the app ecosystem and among critics who've highlighted its secrecy.

Is Apple a tech hero or villain? That debate will continue. But for its shareholders, the answer is clear. Wall Street analysts polled by Thomson Reuters expect the company to earn $2.43 per share on just over $12 billion revenue, compared to $1.33 per share on $8.16 billion one year ago.
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