Market Overview

The 8th Wonder Of The World Is Spelled A-P-P-L-E

Apple Inc. (NASDAQ: AAPL) just can do no wrong.

Last night, the company reported earnings that not only beat Wall Street estimates, but crushed the so called "20% rule" as well. The company reported earnings of $7.79 per share on $28.57 billion in revenues. Wall Street analysts had been expecting earnings of $5.80 per share on $24.92 billion in revenues. Sales for its two major growth drivers, the iPhone and the iPad, grew at 142% and 183%, respecitvely. The company sold 9.25 million iPads, 20.43 million iPhones, 3.95 million Macs, and 7.54 million iPods.

There is just no stopping the Apple train, with metrics like that. Heck, even Mac sales grew 14%, and the computer market is supposed to be dead. Everything this company does is gold, and the adjectives that people throw at this company pale in comparison to what Apple actually does. At this point, Apple can do no wrong in the eyes of shareholders, consumers, Wall Street banks, and the mainstream media.

“We're thrilled to deliver our best quarter ever, with revenue up 82 percent and profits up 125 percent,” Steve Jobs said in the press release. “Right now, we're very focused and excited about bringing iOS 5 and iCloud to our users this fall.”

Peter Oppenheimer, CFO of Apple, said, “We are extremely pleased with our performance which drove quarterly cash flow from operations of $11.1 billion, an increase of 131 percent year-over-year,” he said in a press release. “Looking ahead to the fourth fiscal quarter of 2011, we expect revenue of about $25 billion and we expect diluted earnings per share of about $5.50.”

Shares are trading at just under $400 in pre-market trading, as every Wall Street investment bank is tripping over themselves this morning to raise price targets. Bank of America raised its price target to $515 this morning, some 20% higher than where shares are currently trading. If Apple is able to move into China in a meaningful way, as it looks like it is doing, then $515 could be small potatoes, as China revenues grew six times year-over-year.

With over $76 billion in cash, and short-term securities, Apple has more cash then the largest hedge fund in the world, and is probably more dominant and definitely more relevant in America's eyes.

The company is still cheap at these levels, trading at less than 13 times forward earnings, which is mind boggling for a company growing as fast as Apple is. Everyone keeps saying the law of large companies will eventually catch up to Apple, but that day is not today, and not anytime soon.

There were tweets yesterday that jokingly said the United States should be renamed the "United States of Apple" and with all of the hoopla surrounding the company, it is hard not to agree with that mentality. There may never be another company that is more beloved by main street, Wall Street, and everyone in between.

Steve Jobs, you have created a revolution that will last for years and years to come. Sit back, get healthy, and enjoy the culture that you have created. It is truly a wonder to behold

ACTION ITEMS:

Bullish:
Traders who believe that Apple will continue to crush earnings might want to consider the following trades:

  • Go long Apple, obviously, as it is still cheap at these levels.
  • Consider Apple beneficiaries, like ARM Holdings (NASDAQ: ARMH), OmniVision Technologies, Inc. (NASDAQ: OVTI) and others.

Bearish:
Traders who believe that Apple's growth trajectory is continuing to take over the the consumer electronic space may consider alternate positions:

  • Short names like Research in Motion (NASDAQ: RIMM), Nokia (NYSE: NOK) and Hewlett-Packard (NYSE: HPQ) as Apple continues to eat their lunch.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Posted-In: Earnings Long Ideas News Guidance Short Ideas Movers Tech Trading Ideas Best of Benzinga

 

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