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I re-purchased some at 42.91.

Apple is worth $235 based on conservative estimates for fiscal year 2008 earnings. I expect they should make $5.24 easily, which is 33% more than 2007. They already have shown they can do this in the first quarter of this year. I don't see any downside catalysts other than perhaps some profit taking that at worst could bring the stock down to the low $170s.

The stock should trade down to 44ish...

Baidu just met on EPS, which is disappointing. However, both on revenue and revenue guidance they beat hands down. In addition, Baidu is spending money on projects (such as Baidu Japan, E-commerce, social networking, wikis, radio and TV advertising, etc.) that will pay off later. Baidu can't maintain it's advantage over Google in China by standing still. It's pretty obvious that Baidu was trying to lower expectations with it's press release in February (as posted by CR). Baidu is using this years strength to position itself better in the future and not milking it's impressive growth for short-term gains. The best is still to come from Baidu.

I expect Apple’s earnings to be better than expected but for guidance to be lower than expected partly due to an expected lull in sales for the iPhone in anticipation of 3g as well as caution with regard to the economy. Apple should get up to 170 prior to earnings and then possibly go lower toward 150 and then back up again looking towards Q32008. I wouldn’t sell Apple here but if it gets up to 170 you might take some off the table if you’re very risk averse, but I’m not. I think Apple should hit 200 by the end of the year as long as the US doesn’t go into a major recession. Don’t forget about the new markets for the iPhone that should be this year including Japan.

In December I thought Apple would hit $300 this year and I was blind-sided by the collapse in it's stock this year because of risk-aversion due to the potential of a global recession so that should lessen my credibility on this but I do think that $170 is going to happen and if the economy continues to deteriorate I'll have to reassess.

Growth stocks are cheap. Some examples include Apple trading at 25 times 2008 earnings, Mercadolibre trading at 65 times while growing its bottom line north of 100%, and Baidu trading at 64 times while growing at 80%.

The reason growth stocks are cheap is (obviously because of the risks to growth, which include asset deflation in housing and the raging credit crisis that goes along with it. So what's one way to tell whether the market is thinking (or fearing) that the crisis is going to spread further and cause more bad news? The answer is gold.

When gold made a double top in late November, Mercadolibre (MELI) began a major run that lasted until late December, which ended when gold broke out of its consolidation and went on to knew highs. Gold looks like it may have made a double top on February 11th the same day that Mercadolibre made a large move up off of its lows.

Gold tends to be bought as a safe-haven, when there is a risk of recession, interest rates are going lower, currencies are weakening, and when the financial system is in turmoil. Mercadolibre is an e-commerce company in central and south America that is very leveraged to economic growth.

Gold is acting as a leading indicator. If gold makes new highs, look for more weakness in growth stocks. If it doesn’t, let the good times roll.

Disclosure: I own shares in Mercadolibre (MELI)

Now that I have the weighted-average-shares issue mostly dealt with, I'm going to complete my earnings per share calculation. I'm going to slightly adjust my numbers to be more aggressive here. If this is a mistake we'll see for sure soon enough. Perhaps I'm just too stubborn to allow my numbers to give me zero quarterly sequential growth in earnings for a company that I have a substantial holding in. That's what my prior numbers would've given me. We'll see.

$26.5 Million in revenue

25% operating income margins

$6.625 income

Foreign currency holdings loss estimate: $1,000,000

Other expenses: $1,000,000

Income/Asset tax expense rate from Q3: 33.4%, Q4 with same rate gives $1,544,750

Income after tax: $3,080,250

Preferred stock cost estimate based on rough average: $100,000

Net income: $2,980,250

Taking into account the appreciation of the Brazilian Real (Brazil accounts for roughly 40% of net income), which gained an average of 10% during the quarter from the average of Q3:

$2,980,250(0.40)= $1,192,100

$1,192,100(1.10)= $1,311,310

(0.6)$2,980,250= $1,788,150

$1,311,310 + $1,788,150 = $3,099,460

$3,099,460 / 44,226,567 = $0.07 per share

This is sequential growth rate of 16.67% using the total share count of 44,226,567 retroactively for Q3 (0.06 per share in Q3). This leads to an annual growth rate of 85% going forward (if my numbers are close and if the Q3 to Q4 growth rate is indicative of the company's growth trend). Additionally if you multiply 0.07 by 4 you get a price to earnings ratio of 113 using today's closing price of 31.72 for MELI. Based on this sequential growth rate of 85% (which is sure to change but I think is still worth extrapolating because investors and traders will) I expect earnings of 0.08, 0.095, 0.11, and 0.13 in Qs 1 through 4 and total earnings of 0.415 in 2008. This is substantially below analyst estimates of 0.54. Despite this Mercadolibre is still trading at a P/E of 76 using these lower than expected 2008 earnings. Downside should be limited but with an earnings miss of at least 0.03 compared to analyst estimates of 0.10 and slowing growth and higher costs may still drive the stock lower. I still expect that it will be higher at the end of the year than it is now.

Though these numbers show an EPS of 0.07, it is quite possible that MELI will earn 0.06 (using yesterday's more conservative numbers).

The big questions are why MercadoLibre's revenue growth rate slowed and why margins shrank in Q4 (this is not yet a fact but the company released guidance in January estimating this would be the case.) If there is a good and short-term reason for this shares should ultimately rise following the earnings report and conference call. If there is no good reason and MercadoLibre's growth rate slowing is not a temporary blip and spending growth will continue to trend higher than revenue- shareholders like myself may be in for more punishment. As I said earlier though, I think MELI is cheap even given the worse scenario. It should easily be trading above 40 by mid year.

Disclosure: I own shares in MELI

I was just about to finish writing my analysis for MercadoLibre's (MELI)
Q4 earnings and I hit a roadblock. I was going to divide my estimates
for the company's net income available to common shareholders by the
number of weighted average shares and I realized the company's shares
have expanded considerably. If I use the weighted average shares
number for Q3 I get Q4 earnings of just under 0.10, which is the
consensus among analysts. If I use the number the company lists as
being outstanding at September 30, 2007 (44,226,563) I get earnings of
just over 0.06 per share.

I first ran into confusion with MercadoLibre when I read Patrick Schultz of thestreet.com reporting that MercadoLibre earned 0.13 per share
for Q3 but everywhere else it says they earned 0.07. Worse still, if
you take the number the company lists as the net income available to
common shareholders for Q3 and divide that by the number listed as the
weighted average shares for Q3 you get just over 0.10! Am I missing
something here?

If you look at Apple's earnings report
for the last quarter of 2007 everything adds up. Here is Apple's
explanation for basic earnings per share and diluted earnings per share:

Basic earnings per common
share is computed by dividing income available to common shareholders
by the weighted-average number of shares of common stock outstanding
during the period. Diluted earnings per common share is computed by
dividing income available to common shareholders by the
weighted-average number of shares of common stock outstanding during
the period increased to include the number of additional shares of
common stock that would have been outstanding if the potentially
dilutive securities had been issued. Potentially dilutive securities
include outstanding options, shares to be purchased under the employee
stock purchase plan, and unvested restricted stock units (“RSUs”).

If anyone has any answers they would be much appreciated!

This was the article I was about to write:

MercadoLibre shares have been hit hard due to the fears of a U.S.
recession and global slowdown as well as due to a new issuance of
shares and slightly lower than expected guidance on revenue and
operating income margins. Despite these, the company is still on track
to meet earnings expectations. I expect the company to earn roughly 10
cents per share (which has been the consensus estimate) for the 4th
quarter of 2007.

My calculations are quick and dirty but I think they're close to reality.

Low end of revenue guidance: $26 Million

Lower operating income margin guidance for Q4 relative to Q3
(operating income margin is income from operations as a percentage of
net revenues):

Operating income margin in Q3 was 26% and operating income margin
average for quarters 1 to 3 was 23.4%. Going with 23.4% for Q4 we get
$6,084,000

Foreign currency holdings loss estimate: $1,000,000

Other expenses: $1,000,000

Income/Asset tax expense rate from Q3: 33.4%, Q4 with same rate gives $1,364,056

Preferred stock cost estimate based on rough average: $100,000

Net income: $2,619,944

Taking into account the appreciation of the Brazilian Real (Brazil
accounts for roughly 40% of net income), which gained an average of 10%
during the quarter from the average of Q3: $2,619,944(0.40)=
$1,047,977.60 $1,047,977.60(1.10)= $1,152,775.36 (0.6)$2,619,944=
$1,571,966.40 $1,152,775.36 + $1,571,966.40= $2,724,741.76

$2,724,741.76 / ???

As you can see I had trouble knowing what number to use here for the weighted average shares.

Disclosure: I own (too many) shares in MercadoLibre