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iPhone, iPad momentum may prompt Apple to give less conservative guidance

post #1 of 8
Thread Starter 
In its quarterly earnings call next week, Apple's guidance for the current June quarter may be less conservative than usual, thanks to particularly strong sales of both the iPhone and iPad.

Analyst Shaw Wu with Sterne Agee said in a note to investors Friday that although Apple is famous for "vintage conservative guidance," the company may be more aggressive next Tuesday. He cited momentum for both the iPhone 4S and the new iPad as the main reasons Apple could push investor expectations higher for the June quarter.

Wu's research on iPhone sales has led him to believe there is "room for upside" ahead of next Tuesday's earnings release. He also attempted to dispel some recent concerns that sales of the iPhone 4S could be slowing in developed markets.

Specifically, he noted that some investors are concerned that iPhone activations at Verizon were slightly disappointing, even though Apple outsold all other smartphones at the largest wireless carrier in the U.S. Verizon reported on Thursday that it activated 3.2 million iPhones in the first quarter of calendar 2012.

"We believe concerns of (Verizon) iPhones coming in a little low are overdone," Wu wrote. "Keep in mind VZ is one of what we estimate to be 150 iPhone carriers."

iPhone 4S


While Wu isn't concerned about the iPhone for the March quarter, he does believe that Mac sales to start the year were likely lighter than expected. His checks with Apple's supply chain have indicated that Apple is drawing down inventory ahead of product refreshes, and also that there has been "some minor cannibalization from the iPad."

Wu expects Apple to have sold 29.5 million iPhones in the March quarter, along with 12.3 million iPads and 4.3 million Macs. He has projected the company will report $36.8 billion in revenue and $10.20 in earnings per share.

For the June quarter, Wu has modeled $37.6 billion in revenue and $10.80 in earnings per share, slightly ahead of Wall Street consensus of $37.4 billion in revenue and $9.91 in EPS. Sterne Agee has maintained its "buy" rating for AAPL stock and its price target of $750.
post #2 of 8

Now hold on just a minute. I distinctly remember reading just yesterday (on Google Finance page I believe) that the reason for Apple's stock drop was due to sagging sales of the iPhone and iPad. Now you're telling me that sales are stronger than expected?

 

Man, who are you gonna believe?

 

I think I know. Since I've seldom seen the words turn into reality when the writer is predicting doom & gloom for Apple, I think I'll believe this one.

post #3 of 8

Apple has extremely strong momentum at the moment. No one can deny that fact. But there is still one major negative that literally no one on the street is talking about.

 

AT&T recently announced that they would unlock devices that are either off contract or where the Early Termination Fee has been paid. Because of this, the used iPhone market is now going to see a massive boost - you don't have to jailbreak the phone, and expose yourself to all the risks that entails - you don't have to worry about how to upgrade to a new OS without going through a major rigmarole to get back all your contacts, settings, apps, etc.

 

If the used iPhone market becomes a lot more attractive, it will definitely cannibalize some of the new iPhone market - at least in countries where the iPhone is not sold subsidized. A lot of people might be comfortable buying a year old iPhone 4 for $400, than to buy a new iPhone 4 for $700 (which is what an 8GB iPhone 4 costs in India and China).

 

I expect the impact of this to be quite significant for Apple - simply because the developed markets are close to saturated with iPhones. Realistically, Apple cannot expect to grow much faster than current pace, in the US. Most of the growth in iPhones is going to come from markets like India and China - and it is precisely these markets that are most impacted by the AT&T official unlock.

 

But before you run out and short Apple, remember that Apple very likely has several new products in the pipeline, that could more than make up for any slowdown - irrespective of what the cause of the slowdown is! Betting against Apple is quite a dangerous game!

post #4 of 8

Shaw Wu is not not StarMine star-rated analyst and his comments are inconsequential.

 

He's actually in the back half of the street in terms of accuracy: 

 

http://tech.fortune.cnn.com/2012/01/25/apples-blow-out-quarter-once-again-the-street-blew-it/

 

You can file Wu's comments in the circular file, along with Munster, Huberty... Their track records have a long and very consistent history of being inaccurate -- often crushingly so.

 

And as to giving more aggressive guidance, that won't happen until Apple changes its entire senior management team. Duh.

 

The tech media should not be quoting Shaw Wu as some sort of authoritative source. He has proven to be otherwise.


Edited by cvaldes1831 - 4/20/12 at 7:17am
post #5 of 8

 

Quote:
Originally Posted by Wings View Post

 

Man, who are you gonna believe?

 

It's all outright FUD in both directions. Just ignore the information.

post #6 of 8
...all of which will build Apple's ecosystem. First taste is free and all that.

Also, it has the potential impact of reducing the upgrade cycles for more users. If you can sell your old phone for the ETF, why not get the brand new one?

(Reply to Macarena, since the new forum system seems incompatible with the iPad...)
post #7 of 8

 

Quote:
Originally Posted by Wings View Post

Now hold on just a minute. I distinctly remember reading just yesterday (on Google Finance page I believe) that the reason for Apple's stock drop was due to sagging sales of the iPhone and iPad. Now you're telling me that sales are stronger than expected?

 

Man, who are you gonna believe?

 

I think I know. Since I've seldom seen the words turn into reality when the writer is predicting doom & gloom for Apple, I think I'll believe this one.


There was a video on the WSJ website the other day (not sure if it's there anymore) which basically said the media is causing Apple's stock price drop.  I believe it.  Look at all the analysts hyping Microsoft right now, and the stock is up over 5% today.  Of course some of that is due to earnings release, but IBM and Intel reported solid numbers too and their stock dropped.  Not a day goes by that I don't see a news item from some analyst hyping Windows 8 or Windows phone.  Almost as if they're saying 'please god let someone take down Apple a notch or two' and hoping it's Microsoft. :rolleyes:

post #8 of 8

Apple should have been less conservative with _past_ guidance.  Past growth is not future growth.   There are only so many affluent humans on the globe.  Apple has reached them.  In the next 10 years, many of them will sour on Apple.  Many more will stay loyal Apple customers.  

 

Growth, by definition, ends, particularly when you are on top of a global market.  iPad sales will be discontinued someday, once Apple is out of favor.  This might be 2040 or it might be 2017.  I'll be very impressed if Apple can operate at capacity without losing money in coming years.  Raising the bar at these elevated levels (operationally or financially) is a recipe for disappointment.  Apple can MBA it up for several more years, with earnings guidance staging and so on.  But that isn't what made Apple great.

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