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Apple: Q4 2010 Earnings Preview

post #1 of 25
Thread Starter 
As the market grinds higher in anticipation of a second round of quantitative easing (QE2), all eyes are on Apple as the company sets to report fiscal earnings for its fourth fiscal quarter of 2010 on Monday after the bell.

Analysts polled by Thomson Reuters expect Apple to report approximately $4.06 in EPS on about $18.86 billion in revenue. Yet, according to a more recent poll, professional analysts are looking for Apple to earn closer to $4.11 in EPS on $18.95 billion in revenue. The "professionals," on average, expect revenue to be driven primarily by sales of 11.38 million iPhones, 9.54 million iPods, 3.78 million macs and 4.73 million iPads.

Yet, for those not living under a rock for the past three years, the more reliable estimates come by way of the so-called "Unaffiliated Analysts." According to this collection of bloggers -- who almost always outperform professional Wall Street analysts -- investors should expect to see Apple report about $4.73 in EPS on approximately $20.37 billion in revenue. The general consensus among the unaffiliated blogger-analysts is that revenue will be driven by sales of 12 million iPhones, 9.74 million iPods, 4.01 million macs and 5.52 million iPads.

Based on my earnings model (see here), my estimates this quarter fall on the lower end of the unaffiliated analyst estimates. My model is looking for Apple to report earnings of about $4.64 in EPS on about $19.6 billion in revenue. I'm looking for Apple to report sales of 12 million iPhones, 3.92 million macs, 10 million iPods and 5 million iPads.

Yet, despite my earnings model giving a slightly more conservative outlook for Apple's fiscal Q4, I think its very important that a certain level of deference should be afforded to the general unaffiliated analyst consensus. Investors should consider the reports and earnings models of each of the unaffiliated analysts. The table below outlines my detailed earnings model for Apple's fiscal Q4.



Bullish Cross Past Performance

One more thing...Here is how I did against the entire analyst community last quarter. Under one rating done by Philip Elmer-DeWitt at Fortune (click here) I finished 4th overall out of 32 analysts polled. And under Daniel Tello's more comprehensive rating of all the analysts (click here) I finished 6th overall out of 32 analysts polled across all categories. Notice how the bloggers (notated in Green) collectively outperformed the professional analysts (notated in Red) by a wide margin as a whole.



AppleInsider will provide full coverage of Apple's earnings and ensuing quarterly conference call beginning at 4:35 eastern time today.
post #2 of 25
Thank you, thank you. None of the "professional" sites provided the time of the conference call.

Sheesh.
post #3 of 25
The only question I have is how many iPhones and iPads have to be sold to make the doubters choke on their words. I have never cared about the number of iPhones sold until now, as there has been a massive, coordinated effort to constrain sales with FUD.

As for iPads, I think 4.5M would be plenty, as that would represent 1.5M per month since release. That would more than justify all the hype about sales for the iPad.
Apple has no competition. Every commercial product which competes directly with an Apple product gives the distinct impression that, Where it is original, it is not good, and where it is good, it...
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Apple has no competition. Every commercial product which competes directly with an Apple product gives the distinct impression that, Where it is original, it is not good, and where it is good, it...
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post #4 of 25
Since the media have mocked the professional's by showing the accuracy of many amateur pundits' higher estimates these last few years it's a pretty good guess the professionals will start getting braver and guessing higher.

One day Apple will logically only achieve what everyone predicts and that will be seen as a massive failure! I can't imagine the panic should Apple ever just miss these wild guesses even if the results are stellar.
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From Apple ][ - to new Mac Pro I've used them all.
Long on AAPL so biased
"Google doesn't sell you anything, they just sell you!"
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post #5 of 25
I feel kind of weird reading Zaky's report card. Is that all this article is? What a waste.
post #6 of 25
I keep thinking iPhone numbers are too high and iPad too low from the analysts. It looks like either the "stupid money" is piling into AAPL now, or the smart money is assuming $4.75-5 in EPS on $20B revenue.
post #7 of 25
Quote:
Originally Posted by Eideard View Post

Thank you, thank you. None of the "professional" sites provided the time of the conference call.

Sheesh.

Does your investment firm not keep you in the loop with weekly emails letting you know this kind of stuff?

If the answer is no, I would be making a phone call or two letting them know just how awful their service is, it's their job to make sure you are informed as a client and as best they can; if you have AAPL in your portfolio they should be keeping you up to date with this type of information as it's important to your financial future.
post #8 of 25
Quote:
Originally Posted by Mac Voyer View Post

The only question I have is how many iPhones and iPads have to be sold to make the doubters choke on their words. I have never cared about the number of iPhones sold until now, as there has been a massive, coordinated effort to constrain sales with FUD.

As for iPads, I think 4.5M would be plenty, as that would represent 1.5M per month since release. That would more than justify all the hype about sales for the iPad.


Who cares if someone "chokes on their words"!!! If you have stock in Apple just be happy. If you like Apple products, that is also good, cause they obviously will be around awhile. If you are looking for a world where everyone thinks that Apple is the greatest, you will be sorely disappointed.

BTW, If Apple doesn't have any "competition" why don't they have 90% of the market. Maybe it is because they can't make their "Amazing" products fast enough. I just wish their "Amazing" iPhone was at least good at being a phone. I guess that is too much to ask from an "Amazing" product. I guess it better to focus on features/things that you can impress your friends with.
post #9 of 25
Are any of the analysts factoring the $175 million deferred revenue to Q1 that occurs because of the free case giveaway?
post #10 of 25
hey, terrific, some guy's front page article about what a great analyst he is
post #11 of 25
Why is Zaky getting so much hate? His analyses are among my favorite articles on AI.
Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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post #12 of 25
Quote:
Originally Posted by solipsism View Post

Why is Zaky getting so much hate? His analyses are among my favorite articles on AI.

I've loved his analysis articles, too. But is that what this is?

I mean, this isn't ZakyInsider.com. Do I really care, on earnings day, to read an article on him giving me all his numbers and how he's #4 on some list and #6 on another? No, I don't. If I wanted to know his numbers I bet I could find them in ten seconds or less with a search.

Yeah, I clicked on the link, but I thought it would be a real article.

But whatever. Back to work.
post #13 of 25
Quote:
Originally Posted by digitalclips View Post

Since the media have mocked the professional's by showing the accuracy of many amateur pundits' higher estimates these last few years it's a pretty good guess the professionals will start getting braver and guessing higher.

One day Apple will logically only achieve what everyone predicts and that will be seen as a massive failure! I can't imagine the panic should Apple ever just miss these wild guesses even if the results are stellar.

Doubtful. What everyone should know (and what Andy most certainly does know) is that the affiliated analysts are universally conservative, and not just on their coverage AAPL, but on every stock they cover. How often does any company fail to at least meet the street's consensus earnings? Rarely, and that's by design. I appreciate Andy's work but I thought it was churlish of him to label affiliated analysts as professionals in quotes, as if to imply that they are actually unprofessional, when what it really comes down to is that they're responsible to clients and Andy is not.
Please don't be insane.
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post #14 of 25
Quote:
Originally Posted by phalanx View Post

BTW, If Apple doesn't have any "competition" why don't they have 90% of the market.

They don't if you are looking only at computers. But of course that is also where they do have competition.

If you are looking at phones they don't, but also have competition.

ipods, same

ipads (ie the tablet device market) they don't really have any substantial competition particularly in the US yet so they have like 95% of the market. That will very likely come down when there's another player on the market but perhaps not by much since the ipad had such a huge head start.

Quote:
I just wish their "Amazing" iPhone was at least good at being a phone.

Define Good. Because I know a lot of folks, myself and several friends and co-workers included, that have no issues making calls with their iphones. Even with the whole 'antennagate' media nonsense we had no problems making calls. Mind you none of us that live in areas with crappy ATT coverage. That will be an issue no matter how 'amazing' the iphone is because it can't magically produce congestion free towers wherever you are. And if that is your definition of good, you will remain disappointed


Quote:
Originally Posted by Dr Millmoss View Post

Doubtful. What everyone should know (and what Andy most certainly does know) is that the affiliated analysts are universally conservative, and not just on their coverage AAPL, but on every stock they cover.

Exactly, these guys more often than not come from broker houses and they are analyzing for their clients. With a goal to keep the money in the house. If they predict high and a company doesn't make the mark, it could cause massive selling because of the 'failure'. So they generally don't take that risk

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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post #15 of 25
Quote:
Originally Posted by charlituna View Post

Exactly, these guys more often than not come from broker houses and they are analyzing for their clients. With a goal to keep the money in the house. If they predict high and a company doesn't make the mark, it could cause massive selling because of the 'failure'. So they generally don't take that risk

Yes, and if a company releases an earnings report that doesn't beat the street by a substantial margin, that stock is typically drubbed in after hours or next day trading, or both. The affiliated analysts are known to be conservative, so this is factored in. Given this, I'd say that Apple has to report at least $4.50 EPS, or been seen to have disappointed, or possibly somewhat more to justify the recent run-up in anticipation.
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post #16 of 25
Quote:
Originally Posted by markb View Post

Are any of the analysts factoring the $175 million deferred revenue to Q1 that occurs because of the free case giveaway?

Rounding error, to quote someone from a different context.
post #17 of 25
Quote:
Originally Posted by Dr Millmoss View Post

Doubtful. What everyone should know (and what Andy most certainly does know) is that the affiliated analysts are universally conservative, and not just on their coverage AAPL, but on every stock they cover. How often does any company fail to at least meet the street's consensus earnings? Rarely, and that's by design. I appreciate Andy's work but I thought it was churlish of him to label affiliated analysts as professionals in quotes, as if to imply that they are actually unprofessional, when what it really comes down to is that they're responsible to clients and Andy is not.

I agree. There's been an abundance of research that shows that analyst forecasts -- esp. in the late 1990s and early 2000s -- were prone to a huge optimism bias. Many of us can recall how some industry stalwarts were fingered in the dotcom bubble era (remember Elliot Spitzer?).

As a result, many professional analysts are perhaps now being consciously cautious.

There is one other factor at work as well. They want to under-predict on the positive side since they'd like the company to come in 'beating' their estimate, thus leading to a short-term price bump, thereby vindicating/validating their 'buy' recommendation.
post #18 of 25
interesting. Andy M. Zaky types an "article" about Andy M. Zaky.
post #19 of 25
Quote:
Originally Posted by Dr Millmoss View Post

Doubtful. What everyone should know (and what Andy most certainly does know) is that the affiliated analysts are universally conservative, and not just on their coverage AAPL, but on every stock they cover. How often does any company fail to at least meet the street's consensus earnings? Rarely, and that's by design. I appreciate Andy's work but I thought it was churlish of him to label affiliated analysts as professionals in quotes, as if to imply that they are actually unprofessional, when what it really comes down to is that they're responsible to clients and Andy is not.


This is a point that is conveniently overlooked by AZ. At last, you and I are on the same page ... oh ... did anyone else feel that tremor in the universe?
Apple, bigger than Google, ..... bigger than Microsoft,   The universe is unfolding as it should. Thanks, Apple.
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Apple, bigger than Google, ..... bigger than Microsoft,   The universe is unfolding as it should. Thanks, Apple.
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post #20 of 25
Quote:
Originally Posted by Dr Millmoss View Post

Yes, and if a company releases an earnings report that doesn't beat the street by a substantial margin, that stock is typically drubbed in after hours or next day trading, or both. The affiliated analysts are known to be conservative, so this is factored in. Given this, I'd say that Apple has to report at least $4.50 EPS, or been seen to have disappointed, or possibly somewhat more to justify the recent run-up in anticipation.

I'm guessing that is what we'll see, either in the remaining hours of today, after hours or early morning tomorrow .... just due to some profit taking by the institutions ... and then see them jump back in over the next few weeks. .... just my opinion.
Apple, bigger than Google, ..... bigger than Microsoft,   The universe is unfolding as it should. Thanks, Apple.
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Apple, bigger than Google, ..... bigger than Microsoft,   The universe is unfolding as it should. Thanks, Apple.
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post #21 of 25
Quote:
Originally Posted by newbee View Post

This is a point that is conveniently overlooked by AZ. At last, you and I are on the same page ... oh ... did anyone else feel that tremor in the universe?

I suppose I can stand it if you can.

Quote:
Originally Posted by newbee View Post

I'm guessing that is what we'll see, either in the remaining hours of today, after hours or early morning tomorrow .... just due to some profit taking by the institutions ... and then see them jump back in over the next few weeks. .... just my opinion.

Depends on the report. I don't feel like it's going too far out on a limb to predict that something north of $4.50 EPS will support the recent run-up if not add to it. Much less than that will result in a retrenchment, and a report closer to $4.75 will be treated like a blow-out (street + 15%, as GOOG managed last week). A matter of hours now, and we'll see.
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Please don't be insane.
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post #22 of 25
"Doubtful. What everyone should know (and what Andy most certainly does know) is that the affiliated analysts are universally conservative, and not just on their coverage AAPL, but on every stock they cover. How often does any company fail to at least meet the street's consensus earnings? Rarely, and that's by design. I appreciate Andy's work but I thought it was churlish of him to label affiliated analysts as professionals in quotes, as if to imply that they are actually unprofessional, when what it really comes down to is that they're responsible to clients and Andy is not." From Dr. Millmoss

You're right on point. They do, by nature, have to be conservative. Yet, that being said, getting beat by 50% isn't conservative. Its outright nonsense. Many analysts do a great job. Others not so great. Like being conservative means managing client expectations while being somewhat realistic. Tampering down estimates by 10 or so percent is good enough. They don't need to get beat by 50% in some area. Otherwise, what's the point of the analysis? Why should I pay for a report from morgan stanley when I can get a free report at AI or at Fortune?
Andy M. Zaky
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Andy M. Zaky
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post #23 of 25
I hope the post-conference call reviews pay sufficient tribute to Apple's posted numbers today -- according to this preview story's data, even the more optimistic consensus among the unaffiliated bloggers seems to have been a little timid -- to the effect of ONE BILLION THREE HUNDRED NINETY MILLION DOLLARS!
post #24 of 25
Quote:
Originally Posted by andyzaky View Post

You're right on point. They do, by nature, have to be conservative. Yet, that being said, getting beat by 50% isn't conservative. Its outright nonsense. Many analysts do a great job. Others not so great. Like being conservative means managing client expectations while being somewhat realistic. Tampering down estimates by 10 or so percent is good enough. They don't need to get beat by 50% in some area. Otherwise, what's the point of the analysis? Why should I pay for a report from morgan stanley when I can get a free report at AI or at Fortune?

Since when 50%? Earnings were 14% above the street in this report, which is in the neighborhood of what I've been seeing from consensus numbers for years now. The market has come to expect this degree of undershooting.

You won't get any argument from me about the value of these analyst reports. I don't pay for any of them, and I would prefer to read your analysis than many of the others. Still we have to understand that the consensus numbers are meaningful to the markets. If they weren't, we wouldn't be seeing the less than gleeful reactions to the current report, despite the conservative estimates.
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post #25 of 25
Thanks for your report, keep up the good work! Only thing I'm interested in that I haven't gleamed from your articles is an approximate market cap - keeping me from investing

but we all know the growth can't go on forever!
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