Breakdown: Apple analysts place bets ahead of earnings

[AppleInsider]

With Apple set to report earnings from its second fiscal quarter after the close of the stock market today, several prominent Wall Street analysts have locked in their bets on profits, revenues, gross margin, and unit sales. Here's a breakdown to help investors pinpoint the winners (and losers) at the end of the day.

On average, analysts polled by Thomson Financial expect Apple to earn $1.07 per share on $6.95 billion in revenue for the three month period ending March, compared to management's guidance of $0.94 and $6.8 billion. Meanwhile, consensus estimates for Mac, iPod, and iPhone unit sales are ~2.1 million, ~8.5 to 10 million, and ~1 to 2 million, respectively.

Below are the latest estimates AppleInsider has on file for some of the leading Wall Street analysts currently providing coverage of Apple.

Piper Jaffray analyst Gene Munster

Profit: $1.19 per share
Revenue: $6.9 billion
Gross margin: 36 percent
Macs: 2.1 million
iPhones: 1.6 million to 2.0 million
iPods: 10.0 million to 10.5 million
Current rating: Buy
Price Target: $250

AmTech analyst Shaw Wu

Profit: $1.10 per share
Revenue: $7 billion
Gross margin: 33.5 percent
Macs: 2.15 million
iPhones: 1.5 million
iPods: 10.0 million
Current rating: Neutral
Price Target: $175

Citigroup analyst Rich Gardner

Profit: $1.23 per share
Revenue: $7 billion
Gross margin: 36.5 percent
Macs: 2.1 million
iPhones: 1.5 million
iPods: 9.5 million
Current rating: Buy
Price Target: $212

Lehman Brothers analyst Ben Reitzes

Profit: $1.05 per share
Revenue: $6.95 billion
Gross margin: 33.2 percent
Macs: 2.09 million
iPhones: 1.5 million
iPods: 10.3 million
Current rating: Overweight
Price Target: $195

RBC Capital analyst Mike Abramsky

Profit: $1.11 per share
Revenue: $7.2 billion
Gross margin: 34 percent
Macs: 2.2 million
iPhones: 1.8 million
iPods: 10.0 million
Current rating: Outperform
Price Target: $190

Morgan Stanley analyst Katy Huberty

Profit: $1.10 per share
Revenue: $6.634 billion
Gross margin: 35.8 percent
Macs: 2.02 million
iPhones: 1.0 million
iPods: 8.5 million
Current rating: Overweight
Price Target: $185

Bank of America analyst Scott Craig

Profit: $1.07 per share
Revenue: $6.9 billion
Gross margin: ???
Macs: 2.021 million
iPhones: 1.22 million
iPods: 10.0 million
Current rating: Buy
Price Target: $160

Morgan Keegan analyst Tavis McCourt

Profit: $1.10 per share
Revenue: $7.143 billion
Gross margin: 34 percent
Macs: 2.092 million
iPhones: 1.4 million
iPods: 10.549 million
Current rating: Underperform
Price Target: ???

Note to analysts: The above figures represent the latest data AppleInsider had on file as of Tuesday evening. If there have been changes to your model, shoot us an email and we'll be happy to make updates to this report.

[ View this article at AppleInsider.com ]

[M.O.S.T]

I like the 250$ AAPL price target

[VinitaBoy]

Many, many thanks, AppleInsider Staff! I've been trying to compile the above list on my own for the past couple of months (and not doing a very good job of it). Kudos!

[Lafe]

Thank you AI for compiling this list! Now we'll see which analyst has the real mojo! (If any.)

Can't wait!

[David Stevenson]

Thanks. It's going to be an interesting "call" today at 2 PDT. Was there any rationale in the order of listing? (To me, they are in roughly the order of my opinion of the analysts expertise wrt Apple and AAPL.)

[solipsism]

Wu is predicting $175 in 12 months. Gee, I hope Apple can achieve that whole $11 per share.

[kresh]

Originally Posted by AppleInsider

Meanwhile, consensus estimates for Mac, iPhone, and iPhone unit sales are

Methinks there are one too many iPhones there

[hankx32]

thanks for the research and nice comparison...

[eAi]

Beyond the price target, there's not much to choose between them...

[GQB]

I guess the part I've never understood is this...
AAPL, in January, advises Q1 earnings of what... .94/share (can't remember exactly.)
Now, the analysts come along and bump predictions to 1.05 - 1.07.
So if AAPL posts $1/share the stock tanks, even though AAPL beats what it said it would do?
Don't get where random analysts get to determine the target.
Seems like they could just sell, pull huge numbers out of their asses, watch the stock plummet, and then buy back in low.

What don't I get about this dance?

[solipsism]

Originally Posted by GQB

What don't I get about this dance?

What you aren't getting is that you are rational and most people aren't. They buy for greed and sell on fear, and this usually revolves around rumours. Even if Apple beats their and the analysts Q2 projections it will probably plummet if their Q3 projections are lower than the analysts.

[parky]

Not sure if the averages shown are supposed to be calculated from the all the estimates provided, but if they are they are incorrect.

The average Profit per share based on the estimates should be $1.118
The average Revenue based on the estimates should be $6.965 billion

Ian

[SpamSandwich]

AI, please for the love of AAPL, keep a running tally on this information. We want to weed out the wheat from the chaff, and you are in a better position to keep accurate numbers on each "analyst". Let's hold their feet to the fire on their projections!

[Bageljoey]

Originally Posted by GQB

I guess the part I've never understood is this...
AAPL, in January, advises Q1 earnings of what... .94/share (can't remember exactly.)
Now, the analysts come along and bump predictions to 1.05 - 1.07.
So if AAPL posts $1/share the stock tanks, even though AAPL beats what it said it would do?
Don't get where random analysts get to determine the target.
Seems like they could just sell, pull huge numbers out of their asses, watch the stock plummet, and then buy back in low.

What don't I get about this dance?

Imagine, if you will, a world where nobody checked to see how things were going for a company between when expectations were stated and results were announced. Investing would be even more of a crapshoot that it currently is.

Now imagine if one person had the time and resources to look into the actual progress of a company during the quarter--checking sales, demand, costs and such. That person would then have a HUGE advantage over people who could only be investing by "gut feelings." They would seem to be able to see the future and would would soon dominate the market, hiring others to research other companies until this person was richer than Bill Gates.

Of course, after people saw this one person making a killing, others would start to do the same thing. Why would any serious investor invest blind when others have all this info--they would lose their shirts.

Eventually, as everyone comes to rely on research, it ceases to become a sure thing because now everyone has access to similar information. These researchers become more of a commodity. They stop making their money by seeing the future and investing, and start making it by selling their research to others who base their investments on that information. You now have your "random analyst."

There are benefits to the way this has worked out. The markets tend to be a little more orderly. The "random analysts" are generally much, much closer to the actual numbers than company guidance. So there isn't such a shock to the market when results are announced. Our markets do not like uncertainty.

There are negatives too. Some unscrupulous analysts can put out intentionally misleading information to drive stocks up or down for profit. Hopefully, over time, intelligent people learn to ignore these yahoos or make money off of their shenanigans.

I get tired of people complaining "they are just doing this to drive prices down !" Hey, if you know that then buy when it is low and make money. Same thing if you think someone is driving prices up--sell and wait for the correction and buy again.

Anyway, consider this a 15 minute attempt at answering your question--Of course, I oversimplified like h*ll to get it done in the 15 minutes I had...

[solipsism]

Originally Posted by Bageljoey

[...] Of course, I oversimplified like h*ll to get it done in the 15 minutes I had...

No, that is a great post. You've made a complex topic much easier to wrap your head around.

[aaarrrgggh]

Might be more useful to make bets on guidance for Q3 than Q2 results.

I wouldn't be surprised if Apple beat 35% margins, but I bet they plan on taking a significant margin hit next quarter with all the incentives to clear out iPhones.

My guess is earnings at $1.17, representing a healthy 35% growth from Q2 2007. I expect solid MBA numbers (if provided), around 120k or ~10% of units sold.

But my fear is that Mac unit sales will have much lower growth than expected and spook the market when coupled with the inevitable decline in iPod revenue.

Just a few more hours...

[Constable Odo]

It doesn't matter what the analysts say. There are too many people trying to manipulate this stock so it keeps going up and down like a yo-yo. There analysts that claim it's undervalued and a few claiming it's overvalued. Some say it hasn't run up fast enough and others saying it's run up too quickly.

They're just trying to keep Apple's stock volatile so money can be made for daily traders who like to gamble. As long-term investors we should just consider ourselves lucky if it will again top $200 this year and stays above that for more than a couple of days before some idiot creates a panic and pulls it down again.

Supposedly, for a stock that is claimed to be firing on all cylinders, it sure misfires quite a bit. Overall, Apple is doing almost everything right, yet the stock price still continues to go up and down and never entirely breaks free from slightly bad rumors.

[aaarrrgggh]

Originally Posted by GQB

I guess the part I've never understood is this...
AAPL, in January, advises Q1 earnings of what... .94/share (can't remember exactly.)
Now, the analysts come along and bump predictions to 1.05 - 1.07.
So if AAPL posts $1/share the stock tanks, even though AAPL beats what it said it would do?
Don't get where random analysts get to determine the target.
Seems like they could just sell, pull huge numbers out of their asses, watch the stock plummet, and then buy back in low.

What don't I get about this dance?

Apple's last year results were $0.87/share. If they do $1.00/share, that is 15% growth. Given their makeup of international sales, that would pretty much mean that their actual growth was flat. IBM posted a 35% gain, which would hopefully be the general range that Apple would be at when looking at other companies in similar businesses (the overall blend since there isn't a good peer for Apple anymore).

Stocks that do not pay dividends are generally priced in terms of growth rates, with the assumption that as profit increases, so will the share price.

If earnings are below 1.10 and projections are less than $1.10 for Q3 the stock will drop significantly. If projections are less than 1.15, it will likely drop still. If guidance is at 1.23 or better, the stock will skyrocket.

[aaarrrgggh]

Originally Posted by Constable Odo

Supposedly, for a stock that is claimed to be firing on all cylinders, it sure misfires quite a bit. Overall, Apple is doing almost everything right, yet the stock price still continues to go up and down and never entirely breaks free from slightly bad rumors.

The company is firing on all cylinders, but the stock isn't perfectly linked to that. There is a lot of bearish pressure on the stock now specifically, but it is hitting a pretty good balance around $150. Their P/E is still high enough that without a lot of confidence in future growth they are going to be staled in the 150-165 region for a month or two.

[andyzaky]

Bullish Cross Adjusts Earnings Estimates Based on Final Readings of iPod NPD Sales Data
Tuesday, April 22, 2008
http://bullcross.blogspot.com/2008/0...estimates.html


Yesterday, senior analyst Gene Munster of Piper Jaffray provided his final iPod sales estimates for Apple's (Nasdaq: AAPL) fiscal second quarter ended March 31, 2008 of 10 to 10.5 million units based on his most recent reading of NPD data. As I noted in my initial earnings estimates published on April 7, 2008, my estimates on iPods track Gene Munster's estimates given his extraordinary ability to accurately predict iPod sales quarter after quarter. Munster's initial estimates were for sales of 11.3 million iPods at an average selling price of $172. Yet, current readings on NPD data has lead Munster to reduce his iPod estimates by nearly 800,000 units.

Thus, it is only prudent for my estimates to be reduced slightly to reflect the current quarterly readings on iPod sales data. I am now looking for Apple to report earnings of $1.31-$1.33 in EPS on $7.449 to $7.587 billion in revenue. I am looking for Apple to sell 2.350 million macs, 10.5-11.3 million iPods and 1.7 million iPhones. I am expecting gross margins to rise to 36%, operating expenses to be $1.160 billion, OI&E to be $200 million, COGS to be $4.767 to $4.856 billion and I am looking for $1.171 to $1.204 billion in net income after provisions for income taxes of $551 to $567 million (32%).

In terms of Apple's operating segment information, I expect Apple to produce $3.643 billion in revenue from Mac sales (2.350 million macs at $1,550 ASP), $1.806 to $1.9436 billion in iPod sales (10.5-11.3 million iPods at $172 ASP), and a total of $2 billion derived from its other operating segments (this includes revenue Apple recognizes through its other music related products and services, iPhone and related products & services, peripherals & other hardware, and software, service and other sales).

Scenario #1: Pro Forma Financial Statement (in Millions except per share data)
Revenue........................................... .................................................$ 7,587
Cost of Goods Sold.............................................. .................................$4,856
Gross Margin............................................ ..........................................$2,731 (36%)
OpEx.............................................. .................................................. .$1,160
Operating Income............................................ ....................................$1,571
OI&E.............................................. .................................................. ...$200
Net, Before Taxes............................................. ...................................$1,771
Taxes............................................. .................................................. ..$567 (32%)
Net Income............................................ .............................................$1,20 4
EPS............................................... .................................................. ....$1.33

Segment Information & Product Summary
Macintosh Sales: $3.643 billion
iPods: $1.9436 billion
Other Music Related Products & Services: $600 million
iPhone: $400 million
Peripherals: $420 million
Software: $580 million
Total Revenue: $7.587 billion

------------------------------

Scenario #2: Pro Forma Financial Statement (in Millions except per share data)
Revenue........................................... .................................................$ 7,449
Cost of Goods Sold.............................................. .................................$4,767
Gross Margin............................................ ..........................................$2,682 (36%)
OpEx.............................................. .................................................. .$1,160
Operating Income............................................ ....................................$1,522
OI&E.............................................. .................................................. ...$200
Net, Before Taxes............................................. ...................................$1,722
Taxes............................................. .................................................. ..$551(32%)
Net Income............................................ .............................................$1,17 1
EPS............................................... .................................................. ....$1.31

Segment Information & Product Summary
Macintosh Sales: $3.643 billion
iPods: $1.806 billion
Other Music Related Products & Services: $600 million
iPhone: $400 million
Peripherals: $420 million
Software: $580 million
Total Revenue: $7.449 billion

Disclosure: I own long term 2009 and 2010 call options in Apple. The information contained in this blog is not to be taken as either an investment or trading recommendation, and serious traders or investors should consult with their own professional financial advisers before acting on any thoughts expressed in this publication.

[Bageljoey]

Originally Posted by ShawnJ

Okay, what I don't get is:

If Apple routinely beats its conservative guidance, do the analysts take that into consideration when giving their estimates and pump up their numbers accordingly?

Most analysts (those not involved in pump and dump schemes that so many conspiracy theorists see everywhere) want to be seen as reliable. They will use any tool available to them. If I was an analyst I might start by assuming 5-10% over guidance for a company like Apple that has a long history of being over guidance very consistently. However, that is a piss-poor methodology if that is all you have. Apple has been on a roll for several years, but eventually they are bound to slip, misfire, lose their way or lose their mojo.

"Past performance does not guarantee future results" and all that...

[andyzaky]

Originally Posted by Bageljoey

Most analysts (those not involved in pump and dump schemes that so many conspiracy theorists see everywhere) want to be seen as reliable. They will use any tool available to them. If I was an analyst I might start by assuming 5-10% over guidance for a company like Apple that has a long history of being over guidance very consistently. However, that is a piss-poor methodology if that is all you have. Apple has been on a roll for several years, but eventually they are bound to slip, misfire, lose their way or lose their mojo.

"Past performance does not guarantee future results" and all that...

Past performance does not guarantee future results," but it might help predict those results.

[Bageljoey]

Originally Posted by andyzaky

Past performance does not guarantee future results," but it might help predict those results.

I thought I made clear that I didn't think it was meaningless. But if you only use past performance for investing you are a fool who wants to give his money away.

[andyzaky]

Originally Posted by Bageljoey

I thought I made clear that I didn't think it was meaningless. But if you only use past performance for investing you are a fool who wants to give his money away.

I know. I wasn't presupposing that you thought so. I was just adding to your proclamation.

[Bageljoey]

Originally Posted by andyzaky

I know. I wasn't presupposing that you thought so. I was just adding to your proclamation.

OK. Then I'm with you!

[Bageljoey]

Only Munster and Gardner were high on the per share profit. The other 6 were low--thats a good sign...