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Apple Inc. (AAPL) designs, manufactures and markets personal computers, portable digital music players, and mobile communication devices and sells a variety of related software, services, peripherals and networking solutions. The Company sells its products worldwide through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers and value-added resellers. In addition, the Company sells a variety of third-party Macintosh (Mac), iPod and iPhone compatible products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals through its online and retail stores, and digital content through the iTunes Store. It sells to consumer, small and mid-sized business (SMB), education, enterprise, government and creative customers.

The Company offers a range of personal computing products, including desktop and notebook computers, server and storage products, related devices and peripherals, and various third-party hardware products. The Company’s Mac desktop and portable systems feature Intel microprocessors, the Company’s Mac OS X Version 10.5 Leopard (Mac OS X Leopard) operating system and iLife suite of software for creation and management of digital photography, music, movies, digital versatile discs (DVD) and Web site.

The Company, formerly known as Apple Computer Inc., was founded in 1976 and is headquartered in Cupertino, California.

Source: Reuters.com, SEC Filings.

Financial Summary

AAPL in late January announced financial results for its fiscal 2010 first quarter ended December 26, 2009. The Company posted revenue of $15.68 billion and a net quarterly profit of $3.38 billion, or $3.67 per diluted share. These results compare to revenue of $11.88 billion and net quarterly profit of $2.26 billion, or $2.50 per diluted share, in the year-ago quarter. Gross margin was 40.9%, up from 37.9% in the year-ago quarter. International sales accounted for 58% of the quarter’s revenue.

AAPL sold 3.36 million Macintosh® computers during the quarter, representing a 33% unit increase over the year-ago quarter. The Company sold 8.7 million iPhones in the quarter, representing 100% unit growth over the year-ago quarter. Apple sold 21 million iPods during the quarter, representing an 8% unit decline from the year-ago quarter.

During the quarter AAPL elected retrospective adoption of the Financial Accounting Standards Board’s amended accounting standards related to certain revenue recognition. Adoption of the new accounting standards significantly changes how the Company accounts for certain items, particularly sales of iPhone® and Apple TV®.

On September 23, 2009, the Financial Accounting Standards Board ratified Emerging Issues Task Force (EITF) Issue 08-1 and EITF Issue 09-3, resulting in the issuance of accounting standard updates ASU 2009-13 and ASU 2009-14. Apple was required to adopt the new accounting standards no later than the first quarter of fiscal 2011. Apple elected to adopt the new standards during the first quarter of fiscal 2010, as reflected in its Quarterly Report on Form 10-Q for the quarter ended December 26, 2009, which was filed with the SEC on January 25, 2010. The Company also filed a Form 10-K/A to amend its Form 10-K for the year ended September 26, 2009, solely to reflect the ret
rospective adoption of the new accounting standards to the periods presented in that report. Additionally, Apple filed a Form 8-K that included selected quarterly financial schedules reflecting the impact of retrospective adoption of the new accounting standards and reconciling the application of old and new accounting principles to historical income statements, balance sheets, cash flow from operations, deferred revenue and summary data information. The new accounting principles result in the Company’s recognition of substantially all of the revenue and product cost for iPhone and Apple TV when those products are delivered to customers. Under historical accounting principles, the Company was required to account for sales of both iPhone and Apple TV using subscription accounting because the Company indicated it might from time to time provide future unspecified software upgrades and features for those products free of charge. Under subscription accounting, revenue and associated product cost of sales for iPhone and Apple TV were deferred at the time of sale and recognized on a straight-line basis over each product’s estimated economic life. This resulted in the deferral of significant amounts of revenue and cost of sales related to iPhone and Apple TV.

Because Apple began selling both iPhone and Apple TV in fiscal 2007, the Company retrospectively adopted the new accounting principles as if the new accounting principles had been applied in all prior periods. Consequently, the financial results of each quarter from fiscal 2007 through fiscal 2009 have been revised. The Company believes retrospective adoption provides analysts and investors the most comparable and useful financial information and better reflects the underlying performance of the Company’s business.

Source: Reuters.com, SEC Filings.

Analyst Consensus

This is the consensus forecast among 39 polled investment analysts. Against the Apple Inc. company.

The 34 analysts offering 12-month price targets for AAPL have a median target of 256.50, with a high estimate of 300.00 and a low estimate of 100.00. The median estimate represents a 26.98% increase from the last price of 202.00.

Source: www.ft.com

Consensus Estimates Analysis

Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=AAPL.O

Investment Highlights

AAPL last week announced that music fans have purchased and downloaded over 10 billion songs from the iTunes® Store (www.itunes.com), the world’s most popular online music, TV and movie store. The 10 billionth song, “Guess Things Happen That Way” by Johnny Cash, was purchased by Louie Sulcer of Woodstock, Georgia. As the winner of the iTunes Countdown to 10 Billion Songs, Louie will receive a $10,000 iTunes Gift Card. iTunes is the number one music retailer in the world and features the world’s largest music catalog with over 12 million songs.

The iTunes Store has a catalog of over 12 million songs, over 55,000 TV episodes and over 8,500 movies including over 2,500 in stunning high definition video. With AAPL’s legendary ease of use, pioneering features such as iTunes Movie Rentals, integrated podcasting support, the ability to turn previously purchased tracks into complete albums at a reduced price, and seamless integration with iPod® and iPhone®, the iTunes Store is the best way for Mac® and PC users to legally discover, purchase and download music and video online.

AAPL ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market with its revolutionary iPhone.

AAPL in late January announced financial results for its fiscal 2010 first quarter ended December 26, 2009. The Company posted revenue of $15.68 billion and a net quarterly profit of $3.38 billion, or $3.67 per diluted share. These results compare to revenue of $11.88 billion and net quarterly profit of $2.26 billion, or $2.50 per diluted share, in the year-ago quarter. Gross margin was 40.9%, up from 37.9% in the year-ago quarter. International sales accounted for 58% of the quarter’s revenue.

Source: http://www.apple.com/

Technical Analysis

Source: http://stockcharts.com

AAPL is trading below its 50-day moving average. However, this moving average is trending higher which suggests that there has been buying interest in this stock.

AAPL has been relatively stable recently. This is evidenced by the width of its Bollinger Bands, which are tighter than normal. Additionally, AAPL is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

AAPL’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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