PREVIEW-Apple on a win streak as rivals regroup

* iPhones, iPads, Macs seeing strong demand -analysts

* Android a major challenge -analysts

* SmartEstimate: EPS $5.47, rev $24.5 bln

By Gabriel Madway

SAN FRANCISCO, Jan 13 (BestGrowthStock) – Apple Inc (Read more about Apple stock future.) (AAPL.O: ) enters
2011 on a roll, a cash-generating machine with surging sales
across its product lines — even as it confronts a sea of
restive rivals determined to halt its stunning run of success.

As quarterly earnings approach next Tuesday, expectations
are that Apple’s revenue should easily swell more than 50
percent. That would be a sparkling performance for a company of
any size, much less one with a market value north of $300
billion.

With such momentum, what could potentially derail this
train?

Gleacher & Co analyst Brian Marshall said there’s a danger
that Apple could become a victim of its own success. “If
expectations get too far ahead, there’s no way the company can
live up.”

Still, Marshall had no concerns about Apple’s holiday
season, a sentiment shared on Wall Street: “I don’t think there
was any weakness at all in the quarter.” [ID:nN15234026]

Apple’s advantages are well-documented: the global spread
of the iPhone, which should sell more than 60 million units
this year; the rise of the iPad, which single-handedly created
the tablet computing market; and continued strong growth from
the resurgent Mac line of computers.

The most valuable U.S. company behind Exxon Mobil (XOM.N: ),
Apple added more than $100 billion in market cap in 2010.
Shares have already moved up 7 percent this year, buoyed by the
long-awaited launch of the iPhone with No. 1 U.S. carrier
Verizon Wireless (VZ.N: ) (VOD.L: ).[ID:nN11127756]

With its share price soaring, analysts and investors are
debating the best way to value Apple. The company trades at
roughly 17 times forward earnings, versus 12 times for
Microsoft (MSFT.O: ) and 21 times for Google (GOOG.O: ).

But some argue for excluding Apple’s massive, $50
billion-plus in cash and investments from the valuation,
meaning Apple trades at closer to a 15 multiple.

Brian White, an analyst with Ticonderoga Securities, said
that by that yardstick, Apple looks positively cheap.

“At 15 times ex-cash, they’re not really expensive,” he
said. “It’s tough to really scratch your head on that kind of
multiple with the kind of growth they’ve been delivering.”

For White, the biggest threat to Apple is Google and its
Android mobile operating system, which has seen torrid growth
as it crops up on a slew of both iPhone and iPad rivals.

Last week’s Consumer Electronics Show showcased dozens of
Android-based devices, underscoring the determination of
Apple’s competitors. [ID:nN07205477]

“Almost everybody else is using Android,” he said. “Looking
out two to five years, they (Apple) need to make sure that
Android doesn’t do what Microsoft did to them in the PC
market.”

STRONG HOLIDAY

The consensus benchmarks for Apple’s fiscal first quarter,
which includes the holiday shopping season, are roughly 15.5
million iPhones, 5.5 million iPads and 4 million Mac computers.
As usual, investors will be expecting more.

“The only surprise in earnings is if there is anything less
than glorious news,” said Barry Jaruzelski, a partner at
consulting firm Booz & Co.

Although he says demand for Apple products will continue to
surge, and sees a particular opportunity in the corporate
market, Jaruzelski said the company’s biggest vulnerability may
be in acquiring supply of crucial parts.

“One of the greatest risks they have to actively manage is
around supply constraints and availability, things are probably
running very very tight,” he said. “Even when things are going
right, they’re running right on the line.

Apple is a voracious consumer of touchscreen displays and
flash memory, among other components.

An out-sized surprise in Apple results has become an
article of faith among investors. The company has beaten Wall
Street’s estimate by an average of 29 percent over the past two
years, and bested on revenue by 9 percent on average.

Apple is expected to report earnings of $5.37 a share on
revenue of $24.4 billion, according to Thomson Reuters
I/B/E/S.

According to StarMine’s SmartEstimate, which places more
weight on recent forecasts by top-rated analysts, Apple should
post EPS of $5.47 on revenue of $24.5 billion.

One of Apple’s few weak spots has been gross margin. Last
quarter, Apple’s first margin miss in at least two years raised
the concerns of some investors who feared that its
profitability had peaked. [ID:nN19154054]

Wall Street is forecasting a gross margin of 37.3 percent,
up slightly from the previous period. The company benefited
from favorable component costs in the quarter, analysts said.
(Reporting by Gabriel Madway; Editing by Gary Hill)