Merrill Lynch reduces Apple estimates
Following Apple's March quarter earnings announcement this week, analysts for Merrill Lynch reduced their estimates for the company's June quarter and next two fiscal years.
In a research note, analyst Richard Farmer lowered his expectations for iPod sales during Apple's June quarter from 10.7 million to 9.2 million units. The analyst also cut his fiscal 2006 total iPod unit number from 47.1 million units to 43.4 million.
"Our June quarterÂ*revenue and earnings-per-share estimates are revised down to less than the typical excess of actual results over guidance," he wrote. Farmer expects Apple to earn 47 cents a share on $4.498 million in revenue for the quarter, based on an operating margin of 29.1 percent.
For the entire 2006 fiscal year, the analyst also reduced his earnings-per-share estimates from $2.20 to $2.13. Meanwhile he dropped fiscal year 2007 estimates from $2.94 to $2.84.
"Gross margins beat our model by 140 basis points on flash and panel price declines plus higher software mix," Farmer said of Apple's March quarter. "We have extended our scenario analysis to include gross margin variance."
The analyst said Apple's margin leverage "would be powerful" except he suspects the company's management will focus on growth, increasing features/capacity of its Mac and iPod products at constant price points that could limit the time period it would benefit from the higher margins.
Merrill Lynch maintains a Neutral rating on Apple shares.
In a research note, analyst Richard Farmer lowered his expectations for iPod sales during Apple's June quarter from 10.7 million to 9.2 million units. The analyst also cut his fiscal 2006 total iPod unit number from 47.1 million units to 43.4 million.
"Our June quarterÂ*revenue and earnings-per-share estimates are revised down to less than the typical excess of actual results over guidance," he wrote. Farmer expects Apple to earn 47 cents a share on $4.498 million in revenue for the quarter, based on an operating margin of 29.1 percent.
For the entire 2006 fiscal year, the analyst also reduced his earnings-per-share estimates from $2.20 to $2.13. Meanwhile he dropped fiscal year 2007 estimates from $2.94 to $2.84.
"Gross margins beat our model by 140 basis points on flash and panel price declines plus higher software mix," Farmer said of Apple's March quarter. "We have extended our scenario analysis to include gross margin variance."
The analyst said Apple's margin leverage "would be powerful" except he suspects the company's management will focus on growth, increasing features/capacity of its Mac and iPod products at constant price points that could limit the time period it would benefit from the higher margins.
Merrill Lynch maintains a Neutral rating on Apple shares.
Comments
"Gross margins beat our model by 140 basis points on flash and panel price declines plus higher software mix," Farmer said of Apple's March quarter. "We have extended our scenario analysis to include gross margin variance."
How pretentious do you have to be to say "140 basis points" instead of 1.4%?
Originally posted by Telomar
Most analysts tend to be incredibly bright and more than capable.
And still they end up with price targets of AAPL anywhere from $60 to $101
Originally posted by Telomar
Most analysts tend to be incredibly bright and more than capable.
Explain to me how a person that spends all day researching a company and gets paid for just that tends to have much less clue about that company than us goons who get paid nothing and actually have some other job during the days.
Originally posted by Chucker
Explain to me how a person that spends all day researching a company and gets paid for just that tends to have much less clue about that company than us goons who get paid nothing and actually have some other job during the days.
Chucker, i seriously doubt you have more insight into apple. Being an apple fanboy is not having insight. Can you predict the ipod sales going forward?. can you predict the units of powermac that will be sold in the second or third quarter?. Very rarely (and you can look this up) does a company do significantly better than anaylst expect (espicially on a per share basis and revenue projections).. when companies exceed revenue projections or per share earnings, it's usually within an acceptable range... so no, you don't know more than the analyst. Just saying that you buy a lot of mac stuff or when you go into a store you see a lot of people buying mac stuff doesn't cut it.
Originally posted by wnurse
[Can you predict the ipod sales going forward?. can you predict the units of powermac that will be sold in the second or third quarter?.
No, I can't, and neither can analysts. I can make some educated guesses, just like them.
no, you don't know more than the analyst.
I won't waste my time contesting that baseless claim.
Just saying that you buy a lot of mac stuff or when you go into a store you see a lot of people buying mac stuff doesn't cut it.
I only bought two Apple products in my entire lifetime that I can remember.
Originally posted by Chucker
No, I can't, and neither can analysts. I can make some educated guesses, just like them.
I won't waste my time contesting that baseless claim.
I only bought two Apple products in my entire lifetime that I can remember.
Yes chucker and i am sure you can predict the weather just like the weatherman (afterall, people think they guess too). You too can predict global warming trends just like the experts (what do they know, they guess too). In fact chucker, i think you can predict almost anything. I'm in the computer field.. you know what's the most annonying thing people tell me?.. Oh, i can do your job, all i have to do is read a book.. how hard can it be. I'm sure what you are saying must be the anaylst most annonying statement.
As Captain kirk said to spock one day.. Spock, I trust your educated guesses more than other people facts. I will say to you.. i'd trust the analyst guesses more than i would trust your facts.
Chucker, why don't we let the experts do their job instead of making stupid comments hmmm??... If you were just as good as the analyst, you'd be just as rich as they are. If the analyst all suck, no one would be making money on wall street and if the analyst all covering apple sucked, they'd be out of a job.
Nothing is more annonying than an idiot with no training proclaiming that they can do someone else job better or just as good as they.
Originally posted by wnurse
... stupid ... idiot
Please don´t okay?
APple don´t give the analysts much information so they predict the state of APple much like meteorologists predicted weather before they had information from sattelites and observations from other locations. Remember some of the observations they have based their predictions on? Calling a handful of iPod carrying shops about the availability, even going to Apple stores and observing the buying trends for a couple of hours. Its like standing on a street corner for a couple of hours and observing and then making claims about the extent of unprovoked street violence in the city.
Originally posted by Anders
If what they do is more than educated guesses PLEASE tell me the rationale behind the 65% difference between the target price of different analysists?
APple don´t give the analysts much information so they predict the state of APple much like meteorologists predicted weather before they had information from sattelites and observations from other locations. Remember some of the observations they have based their predictions on? Calling a handful of iPod carrying shops about the availability, even going to Apple stores and observing the buying trends for a couple of hours. Its like standing on a street corner for a couple of hours and observing and then making claims about the extent of unprovoked street violence in the city.
Analyst always have varying predictions.. but chucker statement was a little foolish. He said he could make an educated guess as good as the analyst... educated guess??.. an educated guess implies you are educated in the area you are about to guess in. 20/20 hindsight is perfect.. one can always say look, see they are wrong after the fact but predicting before the fact is not trivial. An educated guess implies that you do more than just guess.. the analyst have to first look at apple past history.. number of units sold in the past, rate of growth, their potential customer base (example, if the U.S has 300 million people and 200 million already own an ipod, it is reasonable to assume that only 100 million will buy, give or take a few for those that want to buy a replacement).. they can examine apple public statements they have to provide to the SEC. They can examine apple same store sales over previous quarters.. yes, at the end of all of this, they can get it wrong but is chucker doing the same thing?. How convenient to claim you too can do what analyst do after the the figures are out.. how about the chucker telling us how many ipods will be sold next month.. apple stock price next month (i'd like to know.. i could make a killing). Anything that involves prediction (weather, stock price, economy, Iraq war outcome, iran nuclear intentions) all involve guessing.. and someone doing the guessing will be wrong but to assume any layman can just guess as well as the experts is just plain silly. You know the group of people who lose the most money?.. those that play the stock market as if they are the experts. I bet if you look it up, you will find a higher percentage of people lose their money in the stock market who did it themselves than those that went through a broker. Yeah, we are all geniuses. (btw, i too played the stock market a few years back, convinced that i could do better than the experts.. what the hell, it was all guessing anyway.. i lost 12,000... and this was when some of the experts was saying that the internet stocks were in a bubble). I was like, what the hell do they know, my stock went up 10% today.. stupid analyst.. they had the last laugh.
I have a friend, she wanted to buy a computer for home and business.. i came in, analysed her situation, told her what to get.. she went against my wishes with a cheaper computer from Dell (hey look, it boots up and starts plus it runs apps.. what does this stupid computer analyst know anyway.. look at me, a layman and i got a computer cheaper than he recommended.. stupid computer expert).. now, the computer is slow, she's in the office all day waiting for stuff to run. She once went to another office and used their computers to do some work and called me on the phone and went.. wow, my office computer takes 3hrs to do my stuff, this computer here takes 30 minutes.. Hmmm.. i was like.. "did i not tell you to get a better computer.. did i not say that the computer you are buying is too slow?". I tell this story to point out another layperson who can do an expert job better than that expert.. yeah, now she is stuck with a painfully slow computer.. wasted all that money when she could have listened to me and gotten a better system. I don't know about chucker but i prefer to let the experts do their thing. When the chucker starts predicting stuff BEFORE they happen and he's better at it, maybe then i'll be impressed.
Originally posted by Anders
If what they do is more than educated guesses PLEASE tell me the rationale behind the 65% difference between the target price of different analysists?.
Target prices are different. I pick up an apple, I think it's worth 50c. Another person says 30c. The apple offers the same sustenance and qualities to both of us just one thinks it is worth more. Ultimately once you hit target price for shares you start talking about value and that's hard to gauge. You can model sales and growth but at the end of the day you have to look at the bottom line and decide what you believe it's worth. I suspect a lot of people are expecting Apple's growth to continue while ML is taking a more conservative view and saying Apple is probably approaching what it's currently worth. Financial market modeling is a whole different science.
Originally posted by Anders
Remember some of the observations they have based their predictions on? Calling a handful of iPod carrying shops about the availability, even going to Apple stores and observing the buying trends for a couple of hours.
How do you think most polls are actually done? Polls used for basically all models in any area tend to consist of calling up a random sample of people and finding out certain information. When they are evaluating road changes all they do is take traffic samples over the course of a week or so.
From that information, which means digging through large amounts of not directly related information, surveys and interviews, they can feed information into various models that they will have created to model sales, and or demand. They can then move forward and get some model on quarterly sales. If you think that's easy try and repeat it. You need some idea of production hassles, BoM, how manufacturing will scale and logistics and you need the familiarity to make a lot of assumptions. It's really not the easiest task and takes a large amount of time and research to pull information from a lot of indirect areas and relate it back.
Good models are built on accurate assumptions, bad models are built on bad assumptions. An analyst bases the assumptions off some real world metric that serves as some guidance but at the end of the day sometimes the assumptions are wrong. It's just what happens.