The Case for Buying Apple (AAPL) Into Earnings

AT&T announced that it sold more than 10 million smartphones in the fourth quarter of 2012, topping its previous record quarter of 9.4 million set in the fourth quarter of 2011. This included best-ever quarterly sales of Android and Apple smartphones. As for Verizon, the company announced an annual increase of nearly 27% in smartphones activations, and it also said that the data included a higher mix of iPhones than in the previous year.

The data looks quite encouraging, and it has prompted analysts at Bernstein to make some simple extrapolations and increase their iPhone sales estimate for the quarter to 55.8 million units, which would be considerably above the current average estimate of 47.6 million by Wall Street analysts.

Retail reports during the holidays have been very bullish regarding Apple’s sales, and the iPad Mini is booming according to almost every report. Even if we see some margin compression, chances are that Apple may report better than expected numbers next week, especially considering that the news flow has been so unfoundedly negative recently.

Long Term Decision, Short Term Timing

Apple Inc. (NASDAQ:AAPL) is not a buy on speculation about the coming earnings release. Competitive strength, innovative culture, brand recognition, financial strength and a dirt cheap valuation, among other things, are the reasons to buy the stock with a long term perspective.

When it comes to the short term implementation of the decision, however, I would prefer to take a position before earnings are announced, at least an initial position, because it’s looking like Apple may report better than expected numbers next week.

The article The Case for Buying Apple Into Earnings originally appeared on Fool.com.

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