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China Mobile iPhone deal not likely included in Apple's guidance to investors

post #1 of 20
Thread Starter 
Apple's realistic -- and historically conservative -- guidance provided to investors likely does not include projected revenue from the company's anticipated impending launch of the iPhone on China Mobile, suggesting to one analyst that shares of AAPL have great upside potential.

Suzhou


Apple gave its guidance for the current December quarter in October, at which point a deal with China Mobile was not in place. But this week it's been claimed that Apple and China Mobile have made an official arrangement to begin offering the iPhone on the world's largest carrier starting Dec. 18.

With a rumored launch date two full weeks before the conclusion of the December quarter, analyst Gene Munster of Piper Jaffray sees a potential benefit for investors in what is already expected to be a blockbuster quarter for the company.

Further, Munster does not believe most Wall Street estimates include potential China Mobile iPhone sales in their 2014 forecasts. Much like Amit Daryanani of RBC Capital Markets said on Wednesday, Munster also believes that Apple could sell 17 million iPhones to China Mobile customers in calendar 2014, resulting in $10 billion in additional revenue for the company over that 12-month span.

Munster noted on Thursday that sales of 17 million iPhone units would represent just 2 percent of China Mobile's total subscriber base of 759 million users in October. It would also account for 10 percent of the carrier's 176 million 3G smartphone subscribers.

China Mobile


"In terms of the mechanics of the 17 million units, it is likely that there would be a proportionally larger chunk of devices sold in the first month or two of the device's availability," Munster wrote in a note to investors. "We also note that if Apple updates the iPhone in the fall, China Mobile would likely get both the new device in addition to the typical pricing changes for existing devices, which could but the iPhone 5c at a more attractive mid-end price."

Piper Jaffray has maintained its price target of $640 for shares of AAPL, which reached a 52-week high Thursday morning. Trading of the stock has been trending higher following the launch of the iPhone 5s and iPhone 5c, as well as the new iPad Air and iPad mini with Retina display.
post #2 of 20
Weren't some analysts saying Apple has no growth left and they need a cheapie iPhone to compete in China? What bozo should I believe this week.
post #3 of 20

I would expect an updated and upward guidance sometime after the 18th.  

 

Much like they updated their guidance a week after they announced the 5s and 5c (I really think they hedged on the release date assuming it was gonna release in October, given all the hints about supply constraints, and setting up new lines for the 5c)

 

Given that Apple had little control over China Mobile's LTE roll-out, I would assume they assumed the worst.  Don't book revenue until it's realized.   Very much the apple way

post #4 of 20
Quote:
Originally Posted by TheOtherGeoff View Post
 

I would expect an updated and upward guidance sometime after the 18th.  

 

Much like they updated their guidance a week after they announced the 5s and 5c (I really think they hedged on the release date assuming it was gonna release in October, given all the hints about supply constraints, and setting up new lines for the 5c)

 

Given that Apple had little control over China Mobile's LTE roll-out, I would assume they assumed the worst.  Don't book revenue until it's realized.   Very much the apple way

 

I wish they would not do that.  Make it a true surprise when they blow out the quarter with;

 

60,000,000 iPhones

30,000,000 iPads

10,000,000 iPods

100,000,000 iOS devices

post #5 of 20
Quote:
Originally Posted by sog35 View Post
 

 

I wish they would not do that.  Make it a true surprise when they blow out the quarter with;

 

60,000,000 iPhones

30,000,000 iPads

10,000,000 iPods

100,000,000 iOS devices

 

I think there is always demand out there, it´s more on Tim and the supply chain. Apple has very accurate supply rates, so they are able to very accurately predict productions. They won´t be pulling numbers like these. They might beat their internal forecast, but not with more than a single digit increase. 55million iphones/23million ipads is possible based on the forecast + increased guidance. But your numbers would go against Apples new way of giving guidance in a very damaging way.

 

As long as Apple has incredibly reliably productions estimates, even if they *could* sell that many, they won´t be able to produce them. 

post #6 of 20

Deal is not official yet so how will guidance show up?

 

Also have to keep in mind that current daily 5S production is 500K.

 

Fun begins when AAPL hits $650. World will want in for new highs above 700. Laggards (Funds) will be chasing the stock in 2014 :lol:

post #7 of 20
Quote:
Originally Posted by sog35 View Post
 

 

I wish they would not do that.  Make it a true surprise when they blow out the quarter with;

 

60,000,000 iPhones

30,000,000 iPads

10,000,000 iPods

100,000,000 iOS devices

err, welcome to publicly traded companies.

if they don't announce once they see a substantial (+/- 10%) factual and confirmed change in earnings, then all the 'insiders' can't buy or sell stocks, until it's publicly announced.

 

I'm sure some on the Board  and the CSuite may like to realize profits (or buy more shares) based on stuff like this*.  Also, it allows them to tell their suppliers about increased demand without setting off rumor alarms.

 

* it's year end... if not because of tax requirements, it may be as trite as 'baby needs new shoes, honey, can you go buy the entire city of Milan for me?'

post #8 of 20
Quote:
Originally Posted by hydr View Post
 

 

I think there is always demand out there, it´s more on Tim and the supply chain. Apple has very accurate supply rates, so they are able to very accurately predict productions. They won´t be pulling numbers like these. They might beat their internal forecast, but not with more than a single digit increase. 55million iphones/23million ipads is possible based on the forecast + increased guidance. But your numbers would go against Apples new way of giving guidance in a very damaging way.

 

As long as Apple has incredibly reliably productions estimates, even if they *could* sell that many, they won´t be able to produce them. 

I think that's a good point: Apple's profits are driven more by its capacity to produce than by demand. However, the reality is that they've had a more than adequate supply of the 5C's for a while now (shipping is still within 24 hours for all models), and same with the iPad 2 and the Mini non-retina. A CM deal could spike those devices as well.

post #9 of 20
Quote:
Originally Posted by TheOtherGeoff View Post

I would expect an updated and upward guidance sometime after the 18th.  

Much like they updated their guidance a week after they announced the 5s and 5c (I really think they hedged on the release date assuming it was gonna release in October, given all the hints about supply constraints, and setting up new lines for the 5c)

Given that Apple had little control over China Mobile's LTE roll-out, I would assume they assumed the worst.  Don't book revenue until it's realized.   Very much the apple way
Samsun will pay the analyst to say regardless of China Mobile's deal, Apple cannot build enough iphone to supply the market, the delivery trucks broke down, the Li-ion caught fire....anything to trash Apple.
post #10 of 20
Gene Monster knows his shizz and 5c colors were invented to be consumed by Asian tweens.
post #11 of 20
Quote:
Originally Posted by helicopterben View Post
 

Deal is not official yet so how will guidance show up?

 

Also have to keep in mind that current daily 5S production is 500K.

 

Fun begins when AAPL hits $650. World will want in for new highs above 700. Laggards (Funds) will be chasing the stock in 2014 :lol:

guidance will likely show up once the deal is a) final b) China Mobile launched, and c) CM orders their first restocking shipment, and no later than Dec 24 (I'm assuming... anything later, and you're just into the middle of the holidays, and Oppenheimer will just have to be locked that soundproof and cell phone proof iPhone testing room for a week to keep the information secret from the rest of the company, thus they are blissfully ignorant of the 'real numbers.'   Once January 1 hits, then they have to be silent anyway on the quarterly numbers.

 

laggards beat the stock down in 2012.  They'll do it again in 2015.  That's why you must buy and hold.

 

5s production?  are you assuming that they sold  45Million 5s's for the quarter?   and likely another 15-20 Million 5c'ss and 4s's  That's conceivable, if not a bit low.

post #12 of 20
Quote:
Originally Posted by sog35 View Post
 

 

I wish they would not do that.  Make it a true surprise when they blow out the quarter with;

 

60,000,000 iPhones

30,000,000 iPads

10,000,000 iPods

100,000,000 iOS devices

 

 

The problem with that approach is that over time the idiots (or scheming crooks depending on your view) on Wallstreet than expect that surprise every time. Pretty soon they were coming up with these ridiculous expectations and sinking the stock when Apple could not deliver on the so called experts' fantasy guidance. Apple's new approach is designed to temper those foolish expectations. Unlike before when it provided conservative guidance and often times surprised people, it now provides a high and low end guidance. If it thinks it is going to kill its own guidance, it  revises it. 

post #13 of 20

Wtf is this "likely does not include" ?  Why aren't these analysts analysing properly and getting definitive answers?  I'd be fired if I delivered such wishy-washy reporting.

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post #14 of 20

Why ever would anyone bake it in until the papers are signed and delivered? Given the squarely nature of most business deals and China being right up there in that category given government's heavy hand it's not going to be over until it's over.

 

Speculation or individual investments can make a "guess" but Apple's not likely to count such speculative chickens, not as hard as the negotiations have been reported as being.

post #15 of 20

I suspect apple will pick up revenue but at what margin?  One has to wonder if China Mobile held out and drove a hard bargain and is getting a better price on iphone then others out there and possibly a cut of service revenues which they stated they wanted too.  If this brings down gross margin the stock will likely follow as more fears of erosion to the bottom line would emerge.

post #16 of 20
Quote:
Originally Posted by sog35 View Post
 

 

I wish they would not do that.  Make it a true surprise when they blow out the quarter with;

 

 

That's what hurt Apple investor's (not Apple itself) pretty badly a few years ago.  Apple earnings estimates could consistently and historically be relied upon to be a lie, err..... I mean to be 'conservative estimates.'  Wall Street got so used to it that Apple's valuation method became along the lines of "Take whatever Apple says, and add 20% to 30% to that"  That is fine as long as Apple consistently beats expectations (as expected). 

 

The problem was that when Apple could no longer beat expectations and could only meet them- the added valuation Wall Street built in to the pricing vanished overnight.  A lot of people here complained about Wall Street for expecting 'the next home run' from Apple, when in fact the problem occurred largely due to Apple's notoriously inaccurate guidance in the first place. 

 

So, if Apple were deliberately doing what you suggest, that's actually a very bad thing for investors in the long run.  Why would you deliberately *want* Apple to return to that method?  Eventually the bubble runs out of bubble.  In this case, if Apple does expect to substantively beat even their prior 'high' guidance, its very likely (and responsible of them) they will have a guidance call.  It just takes a lot of the speculation out of the stock price and makes it more based on actual performance.  In this case the added performance of truckloads more sales via China mobile should drive a healthy positive to their valuation. 

post #17 of 20
Gene Munster has been cautious about and a follower with his Apple predictions since he spectacularly screwed up with the iPhones 5s and C sales numbers. It is funny to read his notes these days to see how much he has changed. Still, it would be great if he just his mouth about Apple.
post #18 of 20
Coz the deal is not inked , how many times do u want me to say
post #19 of 20
Quote:
Originally Posted by mvigod View Post

I suspect apple will pick up revenue but at what margin?  One has to wonder if China Mobile held out and drove a hard bargain and is getting a better price on iphone then others out there and possibly a cut of service revenues which they stated they wanted too.  If this brings down gross margin the stock will likely follow as more fears of erosion to the bottom line would emerge.

I doubt Apple would concede any more than they have to.
Quote:
Originally Posted by Frood View Post

That's what hurt Apple investor's (not Apple itself) pretty badly a few years ago.  Apple earnings estimates could consistently and historically be relied upon to be a lie, err..... I mean to be 'conservative estimates.'  Wall Street got so used to it that Apple's valuation method became along the lines of "Take whatever Apple says, and add 20% to 30% to that"  That is fine as long as Apple consistently beats expectations (as expected). 

The problem was that when Apple could no longer beat expectations and could only meet them- the added valuation Wall Street built in to the pricing vanished overnight.  A lot of people here complained about Wall Street for expecting 'the next home run' from Apple, when in fact the problem occurred largely due to Apple's notoriously inaccurate guidance in the first place. 

Why is it only Apple have inaccurate guidance? Why aren't the analysts blamed for their inaccurate guidance? Do we blame weather forecasters or the weather for being wrong ?
post #20 of 20

Actually we often blame the weather for being chaotic and unpredictable.  Since markets can be the same, it's rather an apt analogy.

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