iPhone, AT&T revenue to highlight Apple's fiscal fourth quarter

[AppleInsider]

Apple's results for the quarter ended September will include strong Mac and iPod sales, but the true stars of the show will be the iPhone and profit sharing with AT&T, according to new analyst reports from Bear Stearns and Piper Jaffray.

Bear Stearns: iPhone will be 'disruptive'

Lead analyst Andrew Neff's research note to investors on Monday observed that while the iPhone's deferred revenue sharing scheme was unlikely to have an immediate impact on Apple's bottom line, the expected strong performance of the device in the quarter and its potential creation of a new category of phone -- a "personal digital lifestyle device" -- could have far-reaching benefits for the Cupertino-based firm's bottom line.

The researcher noted that Apple's software-oriented approach let it both deliver a steady stream of upgrades that could enhance the phone's functionality over time and cater to a different class of user who might be less concerned with business e-mail than having access to content from home.

"With iPhone, it isn't just about having the photos and music with you, but the ability to see, manage and use them in a simple and direct way," Neff argued. "iPhone could address a broader share of the handset market, i.e., not just smartphones."

This could turn an expected boost to iPhone shipments this quarter into a signifcant realignment of the industry, especially as the emphasis shifts to the handset maker rather than the cellular service provider, he said. In tandem with predicted strong sales of iPods and Macs during the quarter, the results were considered proof by the analyst that Apple was establishing multiple stable pillars for its success.

"We believe the Apple story has improved and can now benefit from multiple engines of growth," Neff said.

Piper Jaffray: AT&T's revenue agreement the focus

At investment firm Piper Jaffray, the emphasis was less on the marketshare implications and more on the financial effect of sharing revenues with AT&T, according to a report Tuesday from senior analyst Gene Munster. Shareholders ought to expect a $10.6 million lift to Apple's revenue assuming that Apple has sold 1.05 million iPhones and collects $3 per month for every existing AT&T customer and $11 per month for every new convert from another provider.

Munster also took care to address fears that widespread unlocking would have a significant effect on the immediate quarter. Even if a material percentage of iPhones sold in September were sold to users looking to unlock the phone for other carriers, Apple would still collect the immediate hardware revenue and would only lose about $330,000 of the anticipated revenue this quarter if 5 percent of iPhones did not include AT&T subscriptions, particularly if future software updates prevented a surge in the hacking attempts.

"Ultimately, it is clear that the iPhone unlocking does not have a meaningful financial impact," the analyst noted. "But it has the potential to cut significantly into the revenue sharing income if iPhone unlocking becomes rampant. That said, we believe Apple is working to disable unlocked phones so that the problem does not become widespread."

This would also assume Apple collected a conservative average of 10 percent from each AT&T subscriber. The real percentage could be higher, Munster added.

Piper Jaffray's report also put the iPhone's sales into context. The new iMac and the back-to-school season could lead Apple to ship as many as 2.2 million Macs in the quarter, setting a new record for the company. iPod shipments were also liable to climb, though the September introduction of new iPods meant that most of the reward for Apple from the music players would only manifest itself during the holidays.

Apple was therefore at least in line with most expectations and often slightly ahead of the curve, Munster said, meriting the investment group's Outperform rating on the stock.

[Bageljoey]

(Changed my mind.)

[aplnub]

Originally Posted by Bageljoey

(Changed my mind.)

cha-ching! (for stock owners)

[thebigapple]

Can anyone make sense of these numbers and the current stock price? If Apple comes in with even better-than-expected numbers, that puts the stock at $140 - about 30 points below what it's trading at now - and this does not include the 20-30 million they had to give away to calm down everyone who bought an iPhone early.

I'm guessing there will be a HUGE selloff after earnings or are stockholders, for the first time in history, actually going to hold the stock until February?

[aplnub]

Who knows but the drop in price will be a time to buy. New OS coming out, Christmas shopping season is nearing, and then that subnotebook in March . How can Apple screw this up? :P



Cha-ching again!

[mugwump]

""We believe the Apple story has improved and can now benefit from multiple engines of growth"

'Nuff said.

[melgross]

Originally Posted by thebigapple

Can anyone make sense of these numbers and the current stock price? If Apple comes in with even better-than-expected numbers, that puts the stock at $140 - about 30 points below what it's trading at now - and this does not include the 20-30 million they had to give away to calm down everyone who bought an iPhone early.

I'm guessing there will be a HUGE selloff after earnings or are stockholders, for the first time in history, actually going to hold the stock until February?

I tend to hold through the periods. Apple doesn'r always drop after earnings reports, just sometimes. It's unpredictable. Some of it has to do with what Apple's guidance is for the next quarter.

[artman1033]

Aapl is firing on all cylinders. Look at MrSoftie. Woot just sold 10,500 of the 30 GB Zunes for $99.00 each. Microsoft's cost has to be $125.00 to 155.00 each. The ipod touch is predicted to be the number one Christmas gift. aapl's new software, Leopard will be a winner. aapl's desktops and notebooks are best sellers. Their 200 retail stores are an outstanding retail success story by every measure. Itunes continues to outperform expectations. The iphone is a revolutionary profit center for a telecom device maker. The stock will be $200+ by Thanksgiving.

[thomasfxlt]

Originally Posted by artman1033

Aapl is firing on all cylinders. Look at MrSoftie. Woot just sold 10,500 of the 30 GB Zunes for $99.00 each. Microsoft's cost has to be $125.00 to 155.00 each. The ipod touch is predicted to be the number one Christmas gift. aapl's new software, Leopard will be a winner. aapl's desktops and notebooks are best sellers. Their 200 retail stores are an outstanding retail success story by every measure. Itunes continues to outperform expectations. The iphone is a revolutionary profit center for a telecom device maker. The stock will be $200+ by Thanksgiving.

I don't know about $200, but north of $180 for certain. I guess it depends on earnings and outlook.

I don't know where Bigapple comes up with $140. He must be a short.

[anantksundaram]

Originally Posted by AppleInsider

Shareholders ought to expect a $10.6 million lift to Apple's revenue assuming that Apple has sold 1.05 million iPhones and collects $3 per month for every existing AT&T customer and $11 per month for every new convert from another provider.

"Million" is too low, given the numbers (and "billion" would be too high).

[thebigapple]

Originally Posted by thomasfxlt

I don't know about $200, but north of $180 for certain. I guess it depends on earnings and outlook.

I don't know where Bigapple comes up with $140. He must be a short.

Haha! Nope, can't say I'm a short - I've had the stock since 2003. But, I buy like Warren Buffett - when it's realisticaly priced or undervalued. I could never buy at this price. The basic numbers show that the high estimates are .99. Granted, they will probably beat this, but let's say they have the best quarter ever and they come in at 1.20, beating everything they've ever done and completely blowing away all estimates. That puts the stock, at BEST, at $150. Those are just indisputable numbers. Of course, Apple rocks and their growth is fantastic, but that growth doesn't happen within a few weeks, which is how the stock is reacting. Look at how much volume is going into this stock - it's disproportionate to almost everything out there. I can't imagine this much money in a stock with no dividends will sit for a year....

[thomasfxlt]

Most of the big analysts disagree with your value theory.

Warren's a pretty smart guy, but he ain't god.

As far as the volume going into the stock, it's becoming an institutional holding much the way Microsoft did through it's strong growth years.

Maybe there's some downside, but I'd say $150 would be a surprise (and quite temporary). The likely continued uptick on the computer side of the business and increasing marketshare globally will drive the stock higher for years to come.

[drjjones]

Originally Posted by thebigapple

Haha! Nope, can't say I'm a short - I've had the stock since 2003. But, I buy like Warren Buffett - when it's realisticaly priced or undervalued. I could never buy at this price. The basic numbers show that the high estimates are .99. Granted, they will probably beat this, but let's say they have the best quarter ever and they come in at 1.20, beating everything they've ever done and completely blowing away all estimates. That puts the stock, at BEST, at $150. Those are just indisputable numbers. Of course, Apple rocks and their growth is fantastic, but that growth doesn't happen within a few weeks, which is how the stock is reacting. Look at how much volume is going into this stock - it's disproportionate to almost everything out there. I can't imagine this much money in a stock with no dividends will sit for a year....

There is a lot of things you can't imagine.
Obviously the value of the company drives the price and volatility is the play if you play the stock game. I'm like some that buy and hold . And then buy more. Bought some today at 172.95 and put in to sell at 195. Just enough profit to pay for already established deductions on my tax return ,,about 10 percent of my holdings.. that will go back in another stock for 33 days or so and then i'll decide later whether i'll spend it or reinvest it ..waitin' for 16 gig and 3 g in iphone but will buy leopard and new laptop for daughter for college next 2 weeks or so .. 20,000 shares and still counting ... oops make that 20,002 to be exact .

[rjwill246]

Originally Posted by thebigapple

Can anyone make sense of these numbers and the current stock price? If Apple comes in with even better-than-expected numbers, that puts the stock at $140 - about 30 points below what it's trading at now - and this does not include the 20-30 million they had to give away to calm down everyone who bought an iPhone early.

I'm guessing there will be a HUGE selloff after earnings or are stockholders, for the first time in history, actually going to hold the stock until February?

The numbers have nothing to do with the value of the stock-- they DO have to do with earnings per share-- something that Wall Street tries to predict--- to the exact cent. If Apple hits the mark or just exceeds it, its stock will plummet. So, as you have noted, Apple's achievements are usually greeted with a few days of negative turmoil. Recently the stock fell from $148 to 112 all based on ill-founded rumours, aided by an over-all market decline. Apple is a well manipulated stock and the savvy investors who use Apple's ups and downs to make money, only have to wait til the BIG BOYS decide to "play" Apple.

There are a few organizations that play this stock and manipulate it on a fairly regular basis, so that it is one of the most volatile stocks out there.
A few weeks ago, a fellow from a firm in San Francisco "overheard" a conversation in his office that he passed on happily, that suggested iPhone sales were way lower than even the worst expectations-- a rumour, that was not squashed until the market closed. Apple's stock tanked, but there would have been many who made a killing that day as it slid south.

This doesn't hurt in the long run but, it depends on the rumours. If someone thinks Jobs has more to do with the back-dating scandal, the rascal from Toronto (another naughty boy) will start making dire predictions so that he will, indirectly, profit from the sell-off that will surely follow. He's done this on more than one occasion. So, this sort of long-lasting cloud, as it would be in this case, could be harmful in the long haul if Apple does not have ready the "next new thing" to announce and therefore grab the headlines and divert attention from such a lead-weighted rumour to off-set this kind of crap.

As an investor in the company, I find some days are interesting to say the least.

[thebigapple]

I hear you. I guess I'm a little too conservative to play at these levels. We'll see what happens in the next few days - I've had the stock for a long time and it's exciting to see the rest of the world realize that Apple is a real player in the industry that's not going away any time soon. Best of luck to all of us Apple fanatics!

[aaarrrgggh]

bigapple-- If Apple earns a magical $1.15 per share, that is 85% growth Y/Y, and would suggest that the current high estimate for 1Q2008 of $1.59 could be low by as much as $0.50.

Just looking at Mac unit sales in the current quarter, plus the impact of Christmas and Leopard on next quarter makes a very strong case for the share price.

If you just look at median estimates, we are still talking about a very conservative 37% growth projection, 2x growth for the PE would put them well over $240! There is still huge upside potential, but volatility is going to be rough.

This year I am going to stay away from the MWSF bounce though. It gets me every year... buying in enthusiasm for the new products announced and the earnings excitement. I promise myself to not buy any more shares in January!

[Eriamjh]

Apple does not lose money on unlocked iPhones (due to a lack of the AT&T contract) because unlockers would NOT have bought the phones in the first place.