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Apple's earnings impress, but analysts hold breath for 'latest creation'

post #1 of 31
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Apple beat most Wall Street analysts' expectations Monday when it reported its most profitable quarter ever, but the impending product announcement scheduled for Wednesday is what everyone is really waiting for.

Apple's profits grew 50 percent to $3.38 billion during its first financial quarter of 2010. The company earned $3.67 per diluted share on record sales of $15.68 billion over the holiday shopping season.

The company sold a record 3.36 million Macs, which was a 33 percent increase over a year prior and represented the company's best-ever computer sales. iPhones also saw their strongest sales ever, with Apple shipping 8.7 million handsets. The Cupertino, Calif., company also shipped 21 million iPods.

But most are still waiting for Apple's Wednesday event, scheduled for 10 a.m. Pacific time, to show off the company's "latest creation." As analyst Yair Reiner said in a note to investors Tuesday morning, Apple's earnings report was "not bad for a warm-up act."

Oppenheimer

Reiner said Apple's first-quarter results were helped by strong Mac and iPod sales that offset lower than expected iPhone sales. Because some on Wall Street had projected iPhone sales to approach 10 million, the 8.7 million units sold, while a record, was seen as a disappointment.

"We believe the relative miss was partly the result of inflated sell-side expectations and partly the result of a lackluster initial showing in China," Reiner said. "As a result of the units miss, iPhone revenue of $5.578 billion fell short of our $6.099 billion pro forma estimate and provided less of a margin life than we had expected."

But even with a strong earnings report, it's all about Wednesday and the anticipated debut of Apple's touchscreen tablet. Oppenheimer has increased its price target to $255, from $235.

"The expectations conundrum notwithstanding, we see a lot to like in Apple's results and would continue to be strong buyers ahead of this week's main event -- the tablet unveiling on Wednesday," Reiner wrote.

Piper Jaffray

Senior Research Analyst Gene Munster with Piper Jaffray noted that Apple's revenue guidance was higher than his firm's estimates for only the third time in 15 quarters. Typically, Apple gives extremely conservative guidance that is mostly disregarded by Wall Street.

Still, Munster said he believes the guidance remains conservative, and Apple's forthcoming tablet isn't included in the numbers. On Monday's conference call with analysts, Apple Chief Financial Officer Peter Oppenheimer declined to say whether the new product to be introduced Wednesday was included in Apple's numbers.

"Essentially, Apple's guidance calls for Mac growth to be flat (year over year), vs. the just reported 33%. Hard to believe given the comps are only getting easier," Munster said.



Piper Jaffray slightly increased its price target on AAPL stock to $280, from $279. It has maintained its overweight rating for the company.

J.P. Morgan

Analyst Mark Moskowitz noted Apple's international growth. During the first financial quarter of 2010, overseas sales accounted for 58 percent of the company's business. That's up from the 48 percent average seen in the 2009 fiscal year, and 44 percent in 2008.

"We believe Apple's international momentum is likely to continue on a multi-year growth trajectory, driven by continued 1) retail stores expansion; 2) iPhone traction; and 3) indirect sales channel build out," Moskowitz wrote.

But like others, he's waiting for Wednesday's expected tablet introduction. He believes consensus revenue and earnings per share estimates will be adjusted by those on Wall Street when they see what the "killer application" for the tablet is. J.P. Morgan has a price target of $240 for AAPL.



Needham & Company

Apple surprised in a different way Monday, analyst Charlie Wolf noted, when it switched from GAAP to non-GAAP reporting without warning. Last year, Apple petitioned the Financial Accounting Standards board to change the rules for reporting accounting figures. Previously, the generally accepted accounting principles required Apple to use "subscription accounting" to spread iPhone earnings over the term of the contract signed by the wireless customer, typically two years.

Given the change, Wolf provided an "Apples to Apples" comparison of the company's year-over-year success: revenue increased 32 percent, to $15.7 billion, while earnings per share rose 47 percent, to $3.67. Particularly strong for Apple in the holiday quarter was the new iMac, which caused a 70 percent increase in desktop shipments.

Needham & Company has maintained its price target of $235, however Wolf said he plans to revisit the valuation model to assess the impact of upside of Mac and iPhone sales.

RBC Capital Markets

Revenue from Apple's retail stores was "robust" during the holiday quarter, analyst Mike Abramsky noted. Retail revenue increased 13 percent year-over-year to a total of $2 billion, and Apple sold 689,00 Macs at retail stores, a 34 percent year over year increase.

Abramsky sees big things ahead for Apple, with potential catalysts including the tablet, a Verizon iPhone, and a new entry-level iPhone. Priced in the $500 to $700 "sweet spot," Abramsky said the tablet could bring another $2.8 billion in revenue and $0.30 earnings per share to Apple in the 2010 calendar year.

RBC Capital Markets has maintained a $275 price target for AAPL stock.

Broadpoint.AmTech

Like many analysts, Brian Marshall admits he was "uber-bullish" on holiday iPhone sales. He had forecast 8.8 million units internationally, versus an estimated actual of 6.1 million overseas. But the average selling price of the iPhone increased about 2 percent to $620, which Marshall said makes an even stronger case for investors to buy AAPL.

Even with a slower adoption of new international carriers than expected, the higher average selling price of the iPhone has boosted the company's projected calendar year 2010 earnings per share to $12.00, from $11.75.

Marshall said Apple remains "the best technology company on the planet," with its business model only becoming stronger over time. Broadpoint.AmTech has reiterated its "buy" rating for AAPL and raised its price target to $264, from $260.

Caris & Company

Most stunning to analyst Rober Cihra was Apple's free cash flow during the first financial quarter of 2010, which was $5.4 billion, or $5.48 per share. Apple's net cash position is now $39.8 billion, or $43 per share.

Compared to most other analysts, Cihra was actually extremely bullish on Apple, and forecast non-GAAP revenue of $15.8 billion and $3.81 EPS (vs. actual $15.7 billion and $3.67 EPS). Despite that overestimate, Cihra expects Apple's year over year growth to accelerate next quarter, with revenue of $12.6 billion and $2.69 EPS.

He also noted that Apple's 8.7 million iPhones was less than the recent 10.1 million handsets reported sold by Research in Motion. However, the iPhone commands double the average selling price of RIM's BlackBerries.

Caris & Company has reiterated its "buy" rating and maintained a price target of $260.
post #2 of 31
Anyone think a stock split is coming?
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post #3 of 31
The RDF is at such a high level, if this is not the greatest thing since sex, it will be considered a dud and AAPL will drop 40%.

A mediocre toy by Apple's standards would be a great hit by other companies standards and a complete dud due to the RDF. I hope Apple can live up to all the hype!

I have never seen it at this level! ever!

KRR
post #4 of 31
how much of the growth is due to the new revenue recognition system?
post #5 of 31
Quote:
Originally Posted by krreagan View Post

The RDF is at such a high level, if this is not the greatest thing since sex, it will be considered a dud and AAPL will drop 40%.

A mediocre toy by Apple's standards would be a great hit by other companies standards and a complete dud due to the RDF. I hope Apple can live up to all the hype!

I have never seen it at this level! ever!

KRR

However good it is there will masses of negative reactions for sure. There will be teams of staff from competitors working day and night to pour on ice buckets from the second it is out. Like the RIM team's "Without a keyboard it is useless - about the iPhone, while they feverishly worked on a copy cat device. We can expect the same for the iPad and there are plenty of Dell and M$ fanboys to fan the flames.
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post #6 of 31
Quote:
Originally Posted by digitalclips View Post

Anyone think a stock split is coming?

In years past I might think so, but I think the high relative price (three digits) on the stock gives it a perception of higher prestige (similar to Google's) that helps the stock stay desirable.

KRR
post #7 of 31
Why is it that these analysts are supposedly predicting Apple's performance
and
are so way off from actual and from each other?

I don't understand why people bother paying analysts since they don't really know what Apple, the economy, the people and their trends are going to do. If they are off they act like it was Apple's fault for not meeting the analysts numbers instead of just evaluating how Apple actually performed.

Very strange to think that a company should try to meet analyst predictions...

I am an intelligence analyst, and if the U.S. started blaming the enemy for not conforming to our predictions we would be in a world of hurt.
post #8 of 31
Quote:
Originally Posted by krreagan View Post

In years past I might think so, but I think the high relative price (three digits) on the stock gives it a perception of higher prestige (similar to Google's) that helps the stock stay desirable.

KRR

If rumors that Apple may start buying their own stock back turn out to be true does that impact the likelihood?
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post #9 of 31
Quote:
Originally Posted by estyle View Post

Why is it that these analysts are supposedly predicting Apple's performance
and
are so way off from actual and from each other?

I don't understand why people bother paying analysts since they don't really know what Apple, the economy, the people and their trends are going to do. If they are off they act like it was Apple's fault for not meeting the analysts numbers instead of just evaluating how Apple actually performed.

Very strange to think that a company should try to meet analyst predictions...

I am an intelligence analyst, and if the U.S. started blaming the enemy for not conforming to our predictions we would be in a world of hurt.

I agree. The people that make a living doing this and I would include stock brokers in the same way, are a strange bunch to be sure. Yet people invest with the advice from these so called experts. A few years back when my wife had a windfall to invest her broker advised against Apple after I told her to buy it. She ended up going 50% Apple and 50% with the broker's 'expert' advice. Her Apple is more than double the value the rest is less than half the value. I actually knew a lot about Apple, I assume the broker knew little about the stocks he picked and they were simply in some trade news letter he subscribes to. For this he takes a commission?
From Apple ][ - to new Mac Pro I've used them all.
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Google Motto "You're not the customer. You're the product."
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Long on AAPL so biased
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post #10 of 31
Quote:
Originally Posted by digitalclips View Post

I agree. The people that make a living doing this and I would include stock brokers in the same way, are a strange bunch to be sure. Yet people invest with the advice from these so called experts. A few years back when my wife had a windfall to invest her broker advised against Apple after I told her to buy it. She ended up going 50% Apple and 50% with the broker's 'expert' advice. Her Apple is more than double the value the rest is less than half the value. I actually knew a lot about Apple, I assume the broker knew little about the stocks he picked and they were simply in some trade news letter he subscribes to. For this he takes a commission?

You are luckier than most husbands. Not many can get their wives to listen to them at all. But then, most of the time the wives are right. At least, that is what mine keeps telling me.
post #11 of 31
Hold breath-tschmold breath....
Event preparation costed Apple so much that it's now cheaper to blow analysts and the stock through the roof on the day after tomorrow.

We mean Apple no harm.

People are lovers, basically. -- Engadget livebloggers at the iPad mini event.

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We mean Apple no harm.

People are lovers, basically. -- Engadget livebloggers at the iPad mini event.

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post #12 of 31
I bet whatever Apple announces tomorrow will impress too.
I'm almost certain I will be.
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post #13 of 31
Quote:
Originally Posted by Abster2core View Post

You are luckier than most husbands. Not many can get their wives to listen to them at all. But then, most of the time the wives are right. At least, that is what mine keeps telling me.

I managed to talk my girlfriend into investing 100% of her stash a few years back. Even though I knew Apple was a sure fire winner, it still made me pretty nervous, as had Apple failed, my balls would have been chopped off.
post #14 of 31
Quote:
Originally Posted by krreagan View Post

The RDF is at such a high level, if this is not the greatest thing since sex, it will be considered a dud and AAPL will drop 40%.

A mediocre toy by Apple's standards would be a great hit by other companies standards and a complete dud due to the RDF. I hope Apple can live up to all the hype!

I have never seen it at this level! ever!

KRR


I absolutely agree, RDF level is almost...desperate...


It must be something that isn't going to be accepted by mainstream computer users, a Tablet locked into AT&T and the App Store? Perhaps even subsidized like the iPhone is so more people can get into one and wind up paying more over the long term?

I don't know how AT&T is going to be able to handle the load it already has...
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post #15 of 31
Quote:
Originally Posted by digitalclips View Post

However good it is there will masses of negative reactions for sure. There will be teams of staff from competitors working day and night to pour on ice buckets from the second it is out. Like the RIM team's "Without a keyboard it is useless - about the iPhone, while they feverishly worked on a copy cat device. We can expect the same for the iPad and there are plenty of Dell and M$ fanboys to fan the flames.

And there are plenty of Dell and M$ fanboys right here in the AppleInsider forums who will carry the flags and beat the drums. The usual suspects are already sniping away at yesterday's financial results. After the announcement the flood gates will open wide. It will be brutal to say the least, and very nasty. The venom is already backing up in their throats.
post #16 of 31
Quote:
Originally Posted by lkrupp View Post

And there are plenty of Dell and M$ fanboys right here in the AppleInsider forums who will carry the flags and beat the drums. The usual suspects are already sniping away at yesterday's financial results. After the announcement the flood gates will open wide. It will be brutal to say the least, and very nasty. The venom is already backing up in their throats.

So true.

Envy and frustration is a hard road.

But really, MS and "fanboy" don't seem to go together. And Dell?? What would you be a fan of? Cooling fans and cheap cases? Office? Exchange? LOL.

I guess Xbox . . .
post #17 of 31
Quote:
Originally Posted by al_bundy View Post

how much of the growth is due to the new revenue recognition system?

Read the article. Profits were up 50% - even after changing the prior year's results to reflect the new accounting. Apple adjusted prior year numbers.

Even after adjusting for the new accounting system, Apple handily beat most analysts estimates.

Quote:
Originally Posted by krreagan View Post

The RDF is at such a high level, if this is not the greatest thing since sex, it will be considered a dud and AAPL will drop 40%.

A mediocre toy by Apple's standards would be a great hit by other companies standards and a complete dud due to the RDF. I hope Apple can live up to all the hype!

I have never seen it at this level! ever!

That's not Apple's doing. Apple has said nothing about a tablet - or the products being released this week.

If "RDF" means "people love our products and like to talk about them", then you'd be right. But that isn't what most people mean by the term. Mostly it means "I'm too stupid to understand that some people like Apple products and aren't cheapskates like me so I'll pretend that Apple has somehow brainwashed them".
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post #18 of 31
Are these numbers (RIM's) somewhat skewed by the fact they had "Buy one get one FREE" going on?

It could be, what 5 million instead, which would be LESS then Apple?

Skip
post #19 of 31
Quote:
Originally Posted by digitalclips View Post

If rumors that Apple may start buying their own stock back turn out to be true does that impact the likelihood?

Nope, because splits are meaningless numerical exercises. I don't know where these rumors of a stock repurchase are coming from, but even if true, it probably wouldn't do much if anything to increase investor value. It would have to be an awfully large buyback to make a significant dent in the number of outstanding shares. If Apple wasn't buying back shares when they were trading under $100 only a year ago, why would they do it now? Makes no sense that I can see.
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post #20 of 31
Aple could come up with;
1 - a cure for cancer
2 - a device to immediately transport anyone across the globe (transporter)
3 - a device to run a computer completely with mind power
and the stock would be downgraded & immediately drop $10 and people would complain of "lackluster ideas and forward looking vision".
post #21 of 31
Quote:
Originally Posted by Chris_CA View Post

Aple could come up with;
1 - a cure for cancer
2 - a device to immediately transport anyone across the globe (transporter)
3 - a device to run a computer completely with mind power
and the stock would be downgraded & immediately drop $10 and people would complain of "lackluster ideas and forward looking vision".

Apple invents antigravity.
Apple cures cancer.

Analysts say they are waiting to see if Apple is going to sell tablet before recommending stock as a buy.

World holds breath on direction of Anal - ists!!! Stock drops!!

Heh Heh. I hope the stock tanks quite a bit. I am ready to b uy more. Just want the price to drop so I can make more money.

My adviser pointed my toward oil stock. Its down 40%.

My Apple (that he advised against ) is up from a low of 80. :-)

Just a thought.
en
post #22 of 31
Quote:
Originally Posted by Chris_CA View Post

Aple could come up with;
1 - a cure for cancer
2 - a device to immediately transport anyone across the globe (transporter)
3 - a device to run a computer completely with mind power
and the stock would be downgraded & immediately drop $10 and people would complain of "lackluster ideas and forward looking vision".

"...these are NOT three separate devices!"
post #23 of 31
Quote:
Originally Posted by ncee View Post

Are these numbers (RIM's) somewhat skewed by the fact they had "Buy one get one FREE" going on?

It could be, what 5 million instead, which would be LESS then Apple?

The offer was limited to North America. That's 5% of the world's population and at most 50% of RIM's market.

Remember that the iPhone is also available in lots of countries for free. It certainly is where I live. Shall we not count those sales either?
post #24 of 31
Quote:
Originally Posted by stompy View Post

"...these are NOT three separate devices!"

BAM!
Good one...
post #25 of 31
Quote:
Originally Posted by RichL View Post

The offer was limited to North America. That's 5% of the world's population and at most 50% of RIM's market.

Remember that the iPhone is also available in lots of countries for free. It certainly is where I live. Shall we not count those sales either?

I think it's safe to assume there were lots more free Blackberries given out than iPhones.

The borrom line is tha , as the article says, "the iPhone commands double the average selling price of RIM's BlackBerries."
post #26 of 31
Quote:
Originally Posted by monstrosity View Post

I managed to talk my girlfriend into investing 100% of her stash a few years back. Even though I knew Apple was a sure fire winner, it still made me pretty nervous, as had Apple failed, my balls would have been chopped off.

Investing 100% of your assets in to anything is simply poor fianacial planning. No matter how well you understand the company, the industry or the people involved. Realize here I'm a big fan of Apples recent products but your future wealth should not depend upon one investment or even industry.


Dave
post #27 of 31
Quote:
Originally Posted by RichL View Post

The offer was limited to North America. That's 5% of the world's population and at most 50% of RIM's market.

Remember that the iPhone is also available in lots of countries for free. It certainly is where I live. Shall we not count those sales either?

I think we should count sales by revenue and profit, not units. Not are free devices are equal in value. RiM certainly isnt getting paid from the carrier anywhere near what Apple is getting paid for an iPhone. They might be in the same general smartphone category but most BBs are very cheap in comparison.
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post #28 of 31
Quote:
Originally Posted by solipsism View Post

I think we should count sales by revenue and profit, not units. Not are free devices are equal in value. RiM certainly isnt getting paid from the carrier anywhere near what Apple is getting paid for an iPhone. They might be in the same general smartphone category but most BBs are very cheap in comparison.

Revenue and profit can be equally as misleading though. Many companies are willing to accept lower sale prices in return for sales of complementary goods or services.

For example, the iTunes store is run at just above break even. Why? Because it helps drive hardware sales (Apple's main business). Similarly, RIM produces lower price device in order to drive it's subscription-based push e-mail service.
post #29 of 31
Quote:
Originally Posted by RichL View Post

Revenue and profit can be equally as misleading though. Many companies are willing to accept lower sale prices in return for sales of complementary goods or services.

For example, the iTunes store is run at just above break even. Why? Because it helps drive hardware sales (Apple's main business). Similarly, RIM produces lower price device in order to drive it's subscription-based push e-mail service.

Which has to end up generating revenue and profits... that being the name of the game.
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post #30 of 31
All I can say is that I'm so bloody happy to have bought Apple at a split-adjusted stock price of $6.50/share.
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post #31 of 31
Quote:
Originally Posted by DaveyJJ View Post

All I can say is that I'm so bloody happy to have bought Apple at a split-adjusted stock price of $6.50/share.

So did I (a bit lower, actually), but I am also painfully aware of the fact that AAPL has returned 0% over the past two years. Now that's certainly a lot better performance than I've seen from other stocks in my portfolio which have regressed, but then none of them have grown their profits so specularly during that time period either. The markets have been bidding AAPL's P/E down steadily for two years now, which means that investors are saying that the growth story is over. I don't think it is, but frankly, I'm starting to get kind of antsy
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