JP Morgan: Apple's fourth quarter revenue estimate raised to $18.71B
Citing strong sales momentum for the iPad and iPhone, J.P. Morgan raised its revenue estimates for Apple's fourth fiscal quarter of 2010 from $18.13B to $18.71B, reiterating the company's price target of $400 by December 2011.
J.P. Morgan's positive revision of its revenue estimates extended out to the end of Apple's 2011 fiscal year, with an estimated revenue of $81.53 billion for Apple next fiscal year, up from a previous estimate of $78.84 billion. The report, issued by J.P. Morgan analyst Mark Moskowitz early Thursday, reassured investors that there's "plenty of growth" left for Apple. Checks with primary research contacts by the analyst revealed that the iPhone and iPad were still gaining momentum through the end of Apple's fourth fiscal quarter of 2010 on Sept. 30.
The report does not include a Verizon iPhone in its estimates for the 2011 fiscal year, though the partnership "appears to be coming" as soon as early 2011. According to Moskowitz, a Verizon iPhone could add as much as $2.00 in incremental Earnings Per Share next year.
The analyst sees recent media speculation and supply chain indicators as pointing to a CDMA-based iPhone. He expects "the introduction of a CDMA iPhone first with Verizon in early 2011 and then China Telecom in early to mid-2011."
Apple's gross margins are expected to return to the 40 percent range relatively soon. The analyst upped the September quarter's gross margin estimate from 39.2 percent to 39.5 percent, noting that the "potential cross-over point" to 40 percent margins could come as early as the end of next quarter. Declines in component pricing, especially HDD, DRAM, and NAND flash, are anticipated, counteracting offsets from education discounts and the free iPhone 4 bumper program.
Moskowitz believes that the iPad's "competitive prowess" will surpass that of the iPhone, despite several competitors' plans to bring competing tablets to market.
"We are skeptical, however, of the competition exhibiting a similar adoption curve as the iPad?s," he said. "In contrast to smartphones and the need for apps, we believe the content (movies and TV shows) is the key to tablet adoption, and here, Apple has the content."
The analyst views tablet cannibalization of Macs as nothing to worry about. J.P. Morgan does expect up to a 50 percent cannibalization of netback sales, but "back-of-the-envelope" math points to approximately 5-10 percent cannibalization of the total PC market.
The iPad could actually help sales of Macs, the analyst noted. "We would not be surprised to see another ?halo effect? whereby iPad sales drive purchases of Macs as the central command center for content creation and sharing in a household, and then the iPad offers the ultra-portable experience," said Moskowitz.
J.P. Morgan's estimate that Apple sold 4.7 million iPads in the most recent quarter is higher than Bernstein Research analyst Colin McGranahan's estimate of 4.5 million iPads sold. McGranahan caused a stir Tuesday when he noted that the iPad has had the fastest adoption rate of any non-phone electronic product.
Apple will publish its quarterly earnings report on Monday, Oct. 18, at 5 p.m. Eastern, 2 p.m. Pacific.
J.P. Morgan's positive revision of its revenue estimates extended out to the end of Apple's 2011 fiscal year, with an estimated revenue of $81.53 billion for Apple next fiscal year, up from a previous estimate of $78.84 billion. The report, issued by J.P. Morgan analyst Mark Moskowitz early Thursday, reassured investors that there's "plenty of growth" left for Apple. Checks with primary research contacts by the analyst revealed that the iPhone and iPad were still gaining momentum through the end of Apple's fourth fiscal quarter of 2010 on Sept. 30.
The report does not include a Verizon iPhone in its estimates for the 2011 fiscal year, though the partnership "appears to be coming" as soon as early 2011. According to Moskowitz, a Verizon iPhone could add as much as $2.00 in incremental Earnings Per Share next year.
The analyst sees recent media speculation and supply chain indicators as pointing to a CDMA-based iPhone. He expects "the introduction of a CDMA iPhone first with Verizon in early 2011 and then China Telecom in early to mid-2011."
Apple's gross margins are expected to return to the 40 percent range relatively soon. The analyst upped the September quarter's gross margin estimate from 39.2 percent to 39.5 percent, noting that the "potential cross-over point" to 40 percent margins could come as early as the end of next quarter. Declines in component pricing, especially HDD, DRAM, and NAND flash, are anticipated, counteracting offsets from education discounts and the free iPhone 4 bumper program.
Moskowitz believes that the iPad's "competitive prowess" will surpass that of the iPhone, despite several competitors' plans to bring competing tablets to market.
"We are skeptical, however, of the competition exhibiting a similar adoption curve as the iPad?s," he said. "In contrast to smartphones and the need for apps, we believe the content (movies and TV shows) is the key to tablet adoption, and here, Apple has the content."
The analyst views tablet cannibalization of Macs as nothing to worry about. J.P. Morgan does expect up to a 50 percent cannibalization of netback sales, but "back-of-the-envelope" math points to approximately 5-10 percent cannibalization of the total PC market.
The iPad could actually help sales of Macs, the analyst noted. "We would not be surprised to see another ?halo effect? whereby iPad sales drive purchases of Macs as the central command center for content creation and sharing in a household, and then the iPad offers the ultra-portable experience," said Moskowitz.
J.P. Morgan's estimate that Apple sold 4.7 million iPads in the most recent quarter is higher than Bernstein Research analyst Colin McGranahan's estimate of 4.5 million iPads sold. McGranahan caused a stir Tuesday when he noted that the iPad has had the fastest adoption rate of any non-phone electronic product.
Apple will publish its quarterly earnings report on Monday, Oct. 18, at 5 p.m. Eastern, 2 p.m. Pacific.
Comments
It's one human per iPad. ; )
One thing is for sure, analysts will be hammering Apple hard during the conference call about where the heck all the iPhone4 and iPads are. To them Apple ain't making enough to keep up with demand, which I agree a little but don't mind tooooo much.
Supply issues are frustrating but I don't want quality to take a big dive.
But as a MAC user i'm glad the company is doing well.
One iPad Per Human (OIPH) in 2011
No no...
It's one human per iPad. ; )
How about OiPC? Seriously!
.
How about OiPC? Seriously!
.
Wow. What a cool idea!
(But not gonna happen, given the price.)
how about APPL and its share holders to say thank you to all of us which have spent premium on those products so the revenue grown that nice, huh? They can say thanks to all of us by not charging 30% premium when buying Apple products from outside US and some other special areas (ie HK), but charging same or similar amount as in the US...
There's an easy way to stop that. Just quit voting in your red tape loving socialist governments.
There's an easy way to stop that. Just quit voting in your red tape loving socialist governments.
Have a look at Apple prices all over Europe (UK included?) before saying anything about any red tape...
Btw, I gave HK as example because over there Apple products are actually cheaper than most states in the US.
how about APPL and its share holders to say thank you to all of us which have spent premium on those products so the revenue grown that nice, huh? They can say thanks to all of us by not charging 30% premium when buying Apple products from outside US and some other special areas (ie HK), but charging same or similar amount as in the US...
You would have the pricing you speak of if your government didn't impose tariffs and such on imported Apple HW to start with. Do you expect Apple to pay these for you?
how about APPL and its share holders to say thank you to all of us which have spent premium on those products so the revenue grown that nice, huh? They can say thanks to all of us by not charging 30% premium when buying Apple products from outside US and some other special areas (ie HK), but charging same or similar amount as in the US...
It's called Value Added Tax (VAT):
"What VAT rate will I be charged?
Your Apple Store purchases will be taxed using the applicable VAT tax rate for your country. No intra-community purchases can be made on the Apple Store.
From 1 January 2010, the standard VAT rate for the UK will increase to 17.5 per cent.
Orders placed in the UK after 31 December 2009 will be subject to a VAT rate of 17.5 per cent."
Have a look at Apple prices all over Europe (UK included?) before saying anything about any red tape...
Btw, I gave HK as example because over there Apple products are actually cheaper than most states in the US.
I accept and expect that prices in HK would be cheaper as the transportation costs would be substantially lower since the products are made in China to start with.
Wow. What a cool idea!
(But not gonna happen, given the price.)
Don't forget that Jobs offered them OS X for free, but they turned it down.
iOS would be a better fit, now that it's in ver 4, but they don't want to depend on a company. They are now looking at Android, but that not going to be less encumbered, it will likely be more.
how about APPL and its share holders to say thank you to all of us which have spent premium on those products so the revenue grown that nice, huh? They can say thanks to all of us by not charging 30% premium when buying Apple products from outside US and some other special areas (ie HK), but charging same or similar amount as in the US...
What does Appel Petroleum (APPL) and its shareholders have to do with this discussion?
how about APPL and its share holders to say thank you to all of us which have spent premium on those products so the revenue grown that nice, huh? They can say thanks to all of us by not charging 30% premium when buying Apple products from outside US and some other special areas (ie HK), but charging same or similar amount as in the US...
It isn't Apple that adds the premium. It's the countries the products are imported to that add that.
I was just in the U.K. Prices are much more expensive there, for everything.
For example, the new Kindle sells for 109 pounds. That's about $179.85 depending on the exchange rate. An AtHome dock for the iPhone that sells there for 89 pounds is equal to $146.85, even though it costs $99 here.
There's little manufacturers can do about it. For one thing, most countries have VAT. In the UK it's usually 17%. Then they add up to 10% for products not made there.
Have a look at Apple prices all over Europe (UK included?) before saying anything about any red tape...
Btw, I gave HK as example because over there Apple products are actually cheaper than most states in the US.
Electronics are more expensive in almost every country of the EU. I know that for a fact. I have German friends that come here to buy German photographic products because they're much cheaper here.
But prices aremore expensive in Japan for reason of taxes. Even products made there aremuch more expensive than anywhere else. Same thing is true for S Korea. China adds its own taxes. HK is different because it more of a free trade zone for many, but not all products.