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Apple's iPhone 5c margins, ASP expected to push AAPL previous estimates

post #1 of 29
Thread Starter 
A new report from Morgan Stanley suggests that the iPhone 5c's better-than-anticipated margins and popularity will propel Apple past previous analyst expectations.

huberty-upgrade-eps-20130925.jpg
Source: Morgan Stanley


The report from Morgan Stanley analyst Katy Huberty adjusts Apple's expected earnings per share for the fourth quarter of 2013 upward from $7.51 to $8.00, while holding the line on the stock's 'Overweight' rating and $540.00 price target. Huberty cites higher-than-anticipated margins from the iPhone 5c, which are in turn expected to drive average sale prices for the handset from $565 to $572.

Previous estimates were predicated on the idea that Cupertino would accept tighter gross margins in order to lower the cost of the then-unannounced iPhone 5c in a bid for marketshare in developing nations like Indonesia and Brazil. Apple instead chose to position the iPhone 5c at the upper-mid level of the smartphone market, which Huberty commented on in her post-introduction note to investors on Sept. 11.

"iPhone 5c priced higher than expected," she wrote at the time, "which may limit unit upside but alleviates margin concerns and puts upward pressure on ASPs."

In her latest report, Huberty also estimates that around 3 million of the 9 million iPhones Apple sold over the weekend were iPhone 5s units, with 4 million iPhone 5c units moved. The remainder are believed to represent 1 to 2 weeks of channel inventory for Apple's retail partners.

Huberty is not alone in predicting increased earnings for Apple ? several analysts reacted positively to the company's opening weekend iPhones sales announcement, while Apple revised their own guidance upward on Monday.
post #2 of 29
Note to analyst - Increase your estimate on Apple 20%. We can't have Apple beat our estimates!!!
post #3 of 29
A little different from flip-flop G Munster.

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Do not overrate what you have received, nor envy others.
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post #4 of 29
I can play this guessing game too. Apple will (fail/succeed) because it priced the 5C (too high/just right). I predicted Apple would (sell/ship) (5MM/7MM/9MM) iPhones. I am never wrong. If Apple did (ship/sell) more iPhones, it's because they stuffed the channels.
post #5 of 29
Seems contradictory to everything else coming out-- looks much more like 7MM 5S and 2MM 5C, and the channel sell-through seems to be exceptionally high. I imagine there could easily be 1MM 5C units stuffed in the channel, but that really seems like a longshot-- Apple would have needed to be disappointed with 5C pre-orders to do a stunt like that, and even then it seems uncharacteristic.
post #6 of 29
Blah blah blah earnings. Blah blah blah share price. Blah blah concerns. Expectations blah blah. Margins blah blah blah. Recommendations blah blah blah. Blah blah blah inventory.

There, I'm about as reliable an Analysts as any of them.

(Then tomorrow I flip flop and say exactly the opposite.)

Yes lol, I am highly frustrating seeing these dummy Analysts on every web page I like to visit.
post #7 of 29
Originally Posted by AppleInsider View Post
“iPhone 5c priced higher than expected,” she wrote…

 

The expectations of utter idiots don’t count, sweetheart.

Originally Posted by Marvin

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Originally Posted by Marvin

The only thing more insecure than Android’s OS is its userbase.
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post #8 of 29
Quote:
Originally Posted by Tallest Skil View Post
 

 

The expectations of utter idiots don’t count, sweetheart.

 

[anal-yst mode]

 

But had they only priced the 5c at 5 cents they would have sold eleventy billion!!!

 

[/anal-lyst mode]

post #9 of 29
Quote:
Originally Posted by APPLGUY View Post

Note to analyst - Increase your estimate on Apple 20%. We can't have Apple beat our estimates!!!

 

agreed.  Although, we may hear something like.

 
"You didn't beat our estimates by the amount we secretly thought you would beat our estimates by…"
 
That guidance yesterday should trigger everyone one into thinking that Apple really didn't think they would ship the iPhone 5s until October, or at least till this week.  The math seems to indicate the opening weekend sales is almost exactly the amount of the guidance.   2Billion of extra profit this quarter split evenly on increased revenues (sales of 5s) and greater margins (5c, and apparently 5s as well).
 
There will be some naysayers that opine that they can start 'lowering' prices and say they are taking short term profits and turning away long term growth, but given the fact that the Apple retains iPhone users better than Android does, the long game is still in Apple's favor.   No one appears to be beating them on Price AND mass** consumer's desired functionality.  
 
(** NOTE: MASS means people who don't have an CS, EE, or read Dalvik  or ObjC code, or wallow on AI more than 2 times a year).
post #10 of 29
Quote:
Originally Posted by AppleInsider View Post

Huberty cites higher-than-anticipated margins from the iPhone 5c, which are in turn expected to drive average sale prices for the handset from $565 to $572.

Just how in the world would higher margins drive a higher average selling price?

Huberty doesn't even understand business 101. Why in the world would anyone pay attention to her?
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Gatorguy 5/31/13
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"I'm way over my head when it comes to technical issues like this"
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post #11 of 29
If you are a talentless, bumbling fool, with no concept of business, mathematics, or economics... we have a job for you, Financial Analyst on Wall Street. Clowns all. I'm so glad I'm out of the market. There are so many other better ways to invest without making fools like these financial clowns rich.
post #12 of 29
Quote:
Originally Posted by TheOtherGeoff View Post

agreed.  Although, we may hear something like.
 
"You didn't beat our estimates by the amount we secretly thought you would beat our estimates by…"
 
That guidance yesterday should trigger everyone one into thinking that Apple really didn't think they would ship the iPhone 5s until October, or at least till this week.  The math seems to indicate the opening weekend sales is almost exactly the amount of the guidance.   2Billion of extra profit this quarter split evenly on increased revenues (sales of 5s) and greater margins (5c, and apparently 5s as well).

Actually, I think the guidance yesterday was intended to do just the opposite. By saying that the new numbers were within the previous guidance range (albeit on the high side of that range), Cook is telling people not to get carried away with their wild predictions.
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Gatorguy 5/31/13
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post #13 of 29
Quote:
Originally Posted by AppleInsider View Post

A new report from Morgan Stanley suggests that the iPhone 5c's better-than-anticipated margins and popularity will propel Apple past previous analyst expectations.
 
huberty-upgrade-eps-20130925.jpg
Source: Morgan Stanley


The report from Morgan Stanley analyst Katy Huberty adjusts Apple's expected earnings per share for the fourth quarter of 2013 upward from $7.51 to $8.00, while holding the line on the stock's 'Overweight' rating and $540.00 price target. Huberty cites higher-than-anticipated margins from the iPhone 5c, which are in turn expected to drive average sale prices for the handset from $565 to $572.

Previous estimates were predicated on the idea that Cupertino would accept tighter gross margins in order to lower the cost of the then-unannounced iPhone 5c in a bid for marketshare in developing nations like Indonesia and Brazil. Apple instead chose to position the iPhone 5c at the upper-mid level of the smartphone market, which Huberty commented on in her post-introduction note to investors on Sept. 11.

"iPhone 5c priced higher than expected," she wrote at the time, "which may limit unit upside but alleviates margin concerns and puts upward pressure on ASPs."

In her latest report, Huberty also estimates that around 3 million of the 9 million iPhones Apple sold over the weekend were iPhone 5s units, with 4 million iPhone 5c units moved. The remainder are believed to represent 1 to 2 weeks of channel inventory for Apple's retail partners.

Huberty is not alone in predicting increased earnings for Apple ? several analysts reacted positively to the company's opening weekend iPhones sales announcement, while Apple revised their own guidance upward on Monday.

 

I'm shocked, shocked!

Investment Analysts look out the window and see that Apple delivers - whatever dismal result's they erroneously, and continously,  predict.

Note to "Investment Analysts": try to be professional and look at market realities rather than just writing pablum copy - we have journalists for that.

post #14 of 29
Quote:
Originally Posted by Landcruiser View Post

If you are a talentless, bumbling fool, with no concept of business, mathematics, or economics... we have a job for you, Financial Analyst on Wall Street. Clowns all. I'm so glad I'm out of the market. There are so many other better ways to invest without making fools like these financial clowns rich.

You're "out of the market"? Where do you keep your money?
post #15 of 29

In a followup statement, Katy Huberty also mentions that 4 of the 5 total Zune RT owners are also expected to preorder the Zune RT 2. A 300% gain from the original Zune RT.

post #16 of 29
Quote:
Originally Posted by anantksundaram View Post


You're "out of the market"? Where do you keep your money?

 

In a can tucked safely behind a hole in the drywall.

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post #17 of 29
Old friend Gene Munster. http://blogs.marketwatch.com/thetell/2013/09/24/apples-big-iphone-beat-may-have-gotten-boost-from-unsold-5cs/

"At least two analysts have estimated that part of the big beat came from units of the iPhone 5C that have been shipped to other retailers – but not necessarily sold through to customers. Gene Munster of Piper Jaffray wrote on Monday that he believes about 3.5 million units of the iPhone 5C represent a “sell-in” to other retailers. Apple recognizes a sale when a customer buys a product through its own store and Web site, as well as when it ships a product to a retail partner. Munster noted that all versions of the iPhone 5C remain available on Apple’s Web site to ship within 24 hours of order."
post #18 of 29
Quote:
 The remainder are believed to represent 1 to 2 weeks of channel inventory for Apple's retail partners.

What channel inventory?  "Believed"  Where did they get that one from the crack of there bums. Nobody has any iPhone 5s's.  I mean nobody.  These dumb asses will just not admit that there incompetent and wrong. So they make up this channel inventory b s.  

 

To quote Apples actual press release:

Quote:
 CUPERTINO, California―September 23, 2013―Apple® today announced it has sold a record-breaking nine million new iPhone® 5s and iPhone 5c models, just three days after the launch of the new iPhones on September 20. In addition, more than 200 million iOS devices are now running the completely redesigned iOS 7, making it the fastest software upgrade in history.

Note nowhere in there does it say shipped, or shipped to channel inventory.  It says "SOLD".  And Apple adjusted its outlook accordingly with the SEC with there Form 8k filing.

 

I just don't see how these buffoons can look at themselves in the mirror in the morning and stand themselves.  

What outright liars they are.

post #19 of 29
Quote:
Originally Posted by Mechanic View Post

What channel inventory?  "Believed"  Where did they get that one from the crack of there bums. Nobody has any iPhone 5s's.  I mean nobody.  These dumb asses will just not admit that there incompetent and wrong. So they make up this channel inventory b s.  

To quote Apples actual press release:
Note nowhere in there does it say shipped, or shipped to channel inventory.  It says "SOLD".  And Apple adjusted its outlook accordingly with the SEC with there Form 8k filing.

I just don't see how these buffoons can look at themselves in the mirror in the morning and stand themselves.  
What outright liars they are.

A sale to Walmart is just as much a sale as one to you personally as far as Apple's accounting is concerned. FWIW I don't believe there's any shortage of 5c's, particularly if you're not picky about the color. Check with Verizon or Sprint if you doubt it. Even a local check for the 5s shows them in-stock at Sprint in several Central Florida locations, ready and waiting for someone to take them off their hands.

There's new iPhones in the channel and yes they're counted as sales sitting on a Sprint or Walmart shelf as far as Apple is concerned.
Edited by Gatorguy - 9/24/13 at 4:33pm
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post #20 of 29
Quote:
Originally Posted by Gatorguy View Post


A sale to Walmart is just as much a sale as one to you as far as Apple's accounting is concerned. FWIW I don't believe there's any shortage of 5c's, particularly if you're not picky about the color. Check with Verizon or Sprint if you doubt it. Even a local check for the 5s shows them in-stock at Sprint at least throughout various Central Florida locations, ready and waiting for someone to take them off their hands.

There's new iPhones in the channel and yes they're counted as sales sitting on a Sprint or Walmart shelf as far as Apple is concerned.

 

I think you can pick up any color within 24 hours.

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post #21 of 29
I just saw a listing of revisions of analyst price projections made this afternoon:




* Apple : Barclays raises target price to $540 from $525; rating overweight
* Apple : Canaccord Genuity raises price target to $560 from $550; rating buy
* Apple : Deutsche Bank raises price target to $575 from $480; rating buy
* Apple : Goldman Sachs raises price target to $560 from $530; rating buy
* Apple : Susquehanna raises to positive from neutral - Theflyonthewall.com
post #22 of 29
Quote:
Originally Posted by msuberly View Post

Old friend Gene Munster. http://blogs.marketwatch.com/thetell/2013/09/24/apples-big-iphone-beat-may-have-gotten-boost-from-unsold-5cs/

"At least two analysts have estimated that part of the big beat came from units of the iPhone 5C that have been shipped to other retailers – but not necessarily sold through to customers. Gene Munster of Piper Jaffray wrote on Monday that he believes about 3.5 million units of the iPhone 5C represent a “sell-in” to other retailers. Apple recognizes a sale when a customer buys a product through its own store and Web site, as well as when it ships a product to a retail partner. Munster noted that all versions of the iPhone 5C remain available on Apple’s Web site to ship within 24 hours of order."

 

So, Munster is strongly implying that nearly 40%, FORTY PERCENT of Apple's claimed "9 million sold" is actually inventory sitting on shelves? Ridiculous!!

 

And, to top that, he's saying that the new 5S and 5C combined, barely outsold the smashing success of the iPhone 5 release a year ago? Apple sold 5 million iPhone 5s at launch, Munster is saying only 5.5 million 5S/5C's actually sold this time. A mere 10% increase over the previous record-breaking launch? (As if that news alone wouldn't be worthy of celebrating.)

 

Judging only by the 5C plastic shell alone we can assume the 5C is a LOT easier to manufacture than the 5/5S. I can see Apple getting those out the door in greater quantity and having a longer time to prepare inventory for those (since they are much closer internally to the previous model).

 

But here's another consideration. When you introduce 5 different colors, managing inventory becomes much more challenging, unless you are making them "on demand", or very near to it. I think Apple has a good stock of 5Cs, but is also manufacturing more "to demand", meaning, ramping more on more popular colors. 

 

Although the online shipping still shows 24 hours, many models of the 5C are no longer available for in store pickup. Yellow, Blue and Green in most configurations are no longer available here. So, what does that mean? Are stocks dwindling?

 

In any case, I think these analysts are doing everything possible to derail Apple's success. So the question is why?

post #23 of 29
Quote:
Originally Posted by tribalogical View Post

 

In any case, I think these analysts are doing everything possible to derail Apple's success. So the question is why?

These guys are like defense attorneys, saying anything which may look plausible to try to get them off the hook of eating crow...and now back to your regular scheduled program on the Drama and Reality TV channel;   "Apple is Doomed!"

 

so funny that AAPL dropped last week on news that they did not give sales numbers on 5C pre-sales. ridiculous! Now that the numbers are in and are over the top.. Now they are saying Apple cooked the numbers.  Whatever.  No scruples these analysts ... just fall on your sword already and be done with it!  You were wrong and everyone knows it. Just like last year, and the year before that, and the year before that.


Edited by snova - 9/24/13 at 7:10pm
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post #24 of 29
When I look at that chart, I see "well, it could go up in the upcoming year, or it could go down. Also, it could stay they same."
post #25 of 29
Quote:
Originally Posted by msuberly View Post

Old friend Gene Munster. http://blogs.marketwatch.com/thetell/2013/09/24/apples-big-iphone-beat-may-have-gotten-boost-from-unsold-5cs/

"At least two analysts have estimated that part of the big beat came from units of the iPhone 5C that have been shipped to other retailers – but not necessarily sold through to customers. Gene Munster of Piper Jaffray wrote on Monday that he believes about 3.5 million units of the iPhone 5C represent a “sell-in” to other retailers. Apple recognizes a sale when a customer buys a product through its own store and Web site, as well as when it ships a product to a retail partner. Munster noted that all versions of the iPhone 5C remain available on Apple’s Web site to ship within 24 hours of order."

Dumb reasoning, as Apple being able to ship within 24 hours on its website has nothing to do with retail partners. What, is Apple drop shipping from Walmart? Apple having lots of its own inventory has nothing to do with channel inventory.

The 5Cs may not be as elusive as past iPhones, but honestly, he thinks over 3,500,000 of them are sitting on Walmart et. al. shelves? Asinine.
post #26 of 29
Quote:
Originally Posted by Cletus View Post

When I look at that chart, I see "well, it could go up in the upcoming year, or it could go down. Also, it could stay they same."

 

I would love to see the sophisticated equations they have created  for this graph which yields a y-o-y margin of error of 64%.  

 The stock could be be up $670 or down to $350 in a year from now.  In other words, they have no clue  nor much confidence in much of anything surrounding Apple in their built in equation. Neither positive or negative. worthless.

"Building for the future?! They should be running around reacting to the present!" -John Moltz
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post #27 of 29
Quote:
Originally Posted by quinney View Post

I just saw a listing of revisions of analyst price projections made this afternoon:




* Apple : Barclays raises target price to $540 from $525; rating overweight
* Apple : Canaccord Genuity raises price target to $560 from $550; rating buy
* Apple : Deutsche Bank raises price target to $575 from $480; rating buy
* Apple : Goldman Sachs raises price target to $560 from $530; rating buy
* Apple : Susquehanna raises to positive from neutral - Theflyonthewall.com

My favorite is the analyst (I think it was Munster) who has a target of $425 - yet rated the stock a 'hold'.

Huh? It's a 490. So why would you hold it if you expect it to drop to $425?

ETA - I guess it was Misek, not Munster. Thanks, msuberly. Here's the link:
http://www.streetinsider.com/Analyst+PT+Change/Jefferies+Cuts+PT+on+Apple+%28AAPL%29+to+%24425%3B+%27Terrible%27+Yields+on+Touch+Sensors+%3D+Lower+Shipments/8686014.html

"Jefferies' Peter Misek is lowering his price target on Apple(Nasdaq: AAPL) from $450 to $425 today, while maintaining a Hold rating on the stock."

That makes absolutely no sense at all. Why in the world would you recommend holding a stock that's at $490 if you believe it's going to drop to $425? Of course, it's funny that his reasoning was "low supply due to touch sensor issues" which has been thoroughly debunked with their record shipments.
Edited by jragosta - 9/25/13 at 10:46am
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post #28 of 29

Munster $640, Misek $425.

post #29 of 29

Here's the problem:

 

Huberty adjusts Apple's expected earnings per share for the fourth quarter of 2013 upward from $7.51 to $8.00,

 

while holding the line on the stock's 'Overweight' rating and $540.00 price target.

 

A predicted 6.5% rise in earnings (earnings, not sales!), provides an increase of 0% in predicted stock price.  Bullshit.

 

I can at least believe someone is being honest if they think earnings and stock price are going down (or up), but her "adjustments" are bullshit.

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