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Earnings preview: Wall Street expecting record iPhone, iPad sales from Apple's Q1 2014

post #1 of 40
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This afternoon Apple will report earnings from the company's first fiscal quarter of 2014, and investors expect that the company will reveal record sales of its blockbuster iPhone and iPad product lines, with collective sales of both devices expected to top 80 million.

iPhone 5s


Consensus numbers on Wall Street provided by analyst Gene Munster of Piper Jaffray on Monday show anticipated iPhone sales between 56 million and 57 million units, which would be a new high for the company's best selling smartphone. The iPad is also expected to have a record quarter, with sales of between 24 million and 25 million tablets.

If accurate, that means that the iPhone and iPad would collectively exceed 80 million units sold in one quarter. And those figures would not include the iPod touch, which rounds out Apple's portable lineup of iOS-powered devices.

Market watchers expect Mac sales for the December quarter to be at 4.6 million units. With anticipated 37.5 percent gross margins, investors believe Apple will net $14.35 earnings per share on $58 billion in revenue.

Those numbers are largely in line with StreetAccount figures cited by analyst Maynard Um with Wells Fargo. Those figures call for 24.88 million iPad sales, 54.61 million iPhones, $57.5 billion in revenue, and $14.09 earnings per share.

To put those estimates in perspective, in the same quarter last year, Apple posted record quarterly profit with sales of 47.8 million iPhones, 22.9 million iPads, and 4.1 million Macs. Though the company set new records, investors viewed the year-ago quarter as largely disappointing, citing sagging Mac sales and unmet Wall Street expectations.

Apple will report its first fiscal quarter of 2014 earnings today after markets close. A conference call with Chief Executive Tim Cook is scheduled to follow at 5 p.m. Eastern, 2 p.m. Pacific. AppleInsider will have full, live coverage.
post #2 of 40

Great job with the expectations, Wall Street.

post #3 of 40
This kind of high-expectation/low-faith attitude seems to be what keeps Apple's share price so low. If Apple meets the high expectations, many investors think that was "factored into the price," but the stock actually trades much too low for people to really believe they'll meet the analysts' forecasts. If Apple doesn't meet or beat the high forecasts, investors are disappointed, even if the market never really believed it would in the first place. What is really factored into the price is a kind of perpetual sense of disbelief that any company could be as good as Apple is.
post #4 of 40
Irrational sentiment is annoying, but it's going to shift eventually. At certain point the p/e will become so compressed that no rational person will be able to ignore it. When that moment of clarity comes, look out. We're going to blast off to another totally irrational high.

Would be nice if Apple could just have a stable value relative to the success and profitability of its business.
post #5 of 40

Starting right on time with the "inflated expectations" so when Apple barely misses they have a reason to claim Apple is doomed.

post #6 of 40
Ahhh...Gene Munster. FWIW, I believe that Apple sold more than 1 but less than 1x10^9 iOS devices in the quarter.
post #7 of 40
Frak WS's expectations. They are all guessing!!!
post #8 of 40

Apple rips higher Bulls get Happy, Apple moves lower, Bulls buy more stocks Cheaper :lol:

 

Win Win for Bulls?  :wow:

post #9 of 40
Translation: "Let's tank the stock!"

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #10 of 40
Quote:
Originally Posted by EricTheHalfBee View Post
 

Starting right on time with the "inflated expectations" so when Apple barely misses they have a reason to claim Apple is doomed.

 

The only inflated thing here is the article title.  The expected EPS is only 4% higher than last year...   if Apple cant meet this it means Apple is going down again for a 4th quarter in a row.

 

In 2012, Apple did $13.87 EPS with 37 millions iphones and 16 millions ipad.  IF Apple cant beat this with 55 millions iphones and 25 millions ipad we have a serious problem here, especially after they based there entire Chris mas line up on margins improvement.

 

Wall street is not inflating, its lowballing it. Is it too much to ask for low single digit growth?


Edited by herbapou - 1/27/14 at 10:07am
post #11 of 40
Quote:
Originally Posted by herbapou View Post
 

 

The only inflated thing here is the article title.  The expected EPS is only 4% higher than last year...   if Apple cant meet this it means Apple is going down again for a 4th quarter in a row.

 

In 2012, Apple did $13.87 EPS with 37 millions iphones and 16 millions ipad.  IF Apple cant beat this with 55 millions iphones and 25 millions ipad we have a serious problem here, especially after they based there entire Chris mas line up on margins improvement.

 

Wall street is not inflating, its lowballing it. Is it too much to ask for low single digit growth?

 

Hey, this is Apple Insider, where every barista knows more than all the wall street analyst, who are well-known to be spawn of satan, and paid shills of Samsung. Welcome to idiot country (OK, the idiots are not that numerous, but VERY vocal).

 

As for the earnings, I am pretty sure Apple will beat (as, it seems, are you).

post #12 of 40
Quote:
Originally Posted by herbapou View Post
 

 

The only inflated thing here is the article title.  The expected EPS is only 4% higher than last year...   if Apple cant meet this it means Apple is going down again for a 4th quarter in a row.

 

In 2012, Apple did $13.87 EPS with 37 millions iphones and 16 millions ipad.  IF Apple cant beat this with 55 millions iphones and 25 millions ipad we have a serious problem here, especially after they based there entire Chris mas line up on margins improvement.

 

Wall street is not inflating, its lowballing it. Is it too much to ask for low single digit growth?

 

The thing you are forgetting is margins.  In 2012 I don't think Apple accrued or deferred much revenue for warranty expense and free software/OS.  I think the figure is close to $900M of less revenue.  Apple should really present a pro-forma comparisson of what EPS would be in Q1'13 vs Q1'14 if the same deferred revenue treatment was used in Q1'13.

 

It really is POINTLESS to compare what happened in Q1'12 (37M iphones, 16M ipads) because the margins were ridiculously high that quarter at about 45%.  In fact the whole FY2012 had ridiculous margins at about 46%.  If you look at FY2011 it was about 40% and last year was 37%.  FY2012 and Q1'13 were anomaly's.  We will be comparing to FY2013 vs FY2014 from now on.

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post #13 of 40
It is a contradiction to say "expectations are too high, and the stock price is too low"
 
Expectations are what drive the stock price- until corrected by reality.
 
Today Apple will post reality.
 
The current share price and huge market cap is driven by very high expectations from Apple.
 
If Apple meets those expectations, Wall Street was right and the shares are correctly valued.
If Apple falls below expectations, Wall Street was wrong and gave Apple credit for more than Apple was able to deliver.  Shares should fall.*
If Apple beats expectations, Wall Street was wrong and Apple is worth more than their current valuation.  Shares will rise.*
 
*Provided there is no other indicator in the data that makes the future outlook change.
 
People get blinded by their love of Apple products into thinking Apple shares should just continue to rise regardless of what Apples profits and future outlook are doing.

 

Even if Apple hits expectations spot on, if they announce something positive and not expected for the future, like some new super expensive TV that everyone wants to flock to- their shares will soar.  If unexpected bad news comes out, like carriers eliminating subsidies so people can't get $750 iPhones for $200 anymore, Apple shares will tank.

 

Regardless of the share price, Apple will continue to deliver stellar products.

post #14 of 40
Quote:
Originally Posted by Frood View Post
 

 

Even if Apple hits expectations spot on, if they announce something positive and not expected for the future, like some new super expensive TV that everyone wants to flock to- their shares will soar.  If unexpected bad news comes out, like carriers eliminating subsidies so people can't get $750 iPhones for $200 anymore, Apple shares will tank.

 

Regardless of the share price, Apple will continue to deliver stellar products.

 

Apple does not announce products at earnings conference calls.

post #15 of 40
Quote:
Originally Posted by sog35 View Post
 

 

The thing you are forgetting is margins.  In 2012 I don't think Apple accrued or deferred much revenue for warranty expense and free software/OS.  I think the figure is close to $900M of less revenue.  Apple should really present a pro-forma comparisson of what EPS would be in Q1'13 vs Q1'14 if the same deferred revenue treatment was used in Q1'13.

 

It really is POINTLESS to compare what happened in Q1'12 (37M iphones, 16M ipads) because the margins were ridiculously high that quarter at about 45%.  In fact the whole FY2012 had ridiculous margins at about 46%.  If you look at FY2011 it was about 40% and last year was 37%.  FY2012 and Q1'13 were anomaly's.  We will be comparing to FY2013 vs FY2014 from now on.

 

I am guessing that the 5c is a very high margin product, so margins may well rebound.

post #16 of 40
Quote:
Originally Posted by sog35 View Post
 

It really is POINTLESS to compare what happened in Q1'12 (37M iphones, 16M ipads) because the margins were ridiculously high that quarter at about 45%.  In fact the whole FY2012 had ridiculous margins at about 46%.  If you look at FY2011 it was about 40% and last year was 37%.  FY2012 and Q1'13 were anomaly's.  We will be comparing to FY2013 vs FY2014 from now on.

 

I think comparing to 2012 earning is relevant.  In 2012 they went for a same form factor phone (the 4s) which rose margins. This is what we have now, the 5s is the same form factor than the 5. On the ipad side, Apple hold its ground on prices, selling all lines with very expensive prices compare to competition.

 

IF Apple did good on unit sales, EPS is bound to rise. I dont see how selling more at a high price with more margins could possibly results in tiny EPS growth. Even if they come up with no unit sales growth they should rise margins and EPS compare to 2013.


Edited by herbapou - 1/27/14 at 10:35am
post #17 of 40
Quote:
Originally Posted by marubeni View Post
 

 

I am guessing that the 5c is a very high margin product, so margins may well rebound.

 

There entire Chrismas line up are all high margins, all ipads models and iphone models stayed expensives across the board. IF margins are not up they better a good explanation...

post #18 of 40
Quote:
Originally Posted by herbapou View Post
 

 

I think comparing to 2012 earning is relevant.  In 2012 they went for a same form factor phone (the 4s) which rose margins. This is what we have now, the 5s is the same form factor than the 5. On the ipad side, Apple hold its ground on prices, selling all lines with very expensive prices compare to competition.

 

IF Apple did good on unit sales, EPS is bound to rise. I dont see how selling more at a high price with more margins could possibly results in tiny EPS growth. Even if they come up with no unit sales growth they should rise margins and EPS compare to 2013.

 

I'm tempering my expectations because Apple guided to 36.5-37.5% gross margin and they have been very accurate ever since they changed their method of not sand bagging guidance.  Q1'12 gross margin was 45% and Q1'13 was 38.6%.  So its very depressing that they guided to 37% for Q1'14 even though most think they have a higher margin lineup AND more unit sales.

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post #19 of 40
Quote:
Originally Posted by herbapou View Post
 

 

There entire Chrismas line up are all high margins, all ipads models and iphone models stayed expensives across the board. IF margins are not up they better a good explanation...

 

Well $900,000,000 revenue will be deferred for free software (iwork, ect) and free OS.  That takes out about 1% GM right there.  It still boggles my mind that it actual cost that much to develop OS and the software

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post #20 of 40
Quote:
Originally Posted by sog35 View Post
 

 

I'm tempering my expectations because Apple guided to 36.5-37.5% gross margin and they have been very accurate ever since they changed their method of not sand bagging guidance.  Q1'12 gross margin was 45% and Q1'13 was 38.6%.  So its very depressing that they guided to 37% for Q1'14 even though most think they have a higher margin lineup AND more unit sales.

 

I am hoping they lowball margins, they did announced those before they launch the Chrismas line up, maybe they were still debating in september if they were going after units or margins so they lowball it.

 

imo Apple will blowout on EPS this evening. I think unit sales are going to come in as expected, but EPS and margins will blowout.


Edited by herbapou - 1/27/14 at 10:59am
post #21 of 40
Quote:
Originally Posted by herbapou View Post
 

 

I am hoping they lowball margins, they did announced those before they launch the Chrismas line up, maybe they were still debating in september if they were going after units or margins so they lowball it.

 

imo Apple will blowout on EPS this evening. I think unit sales are going to come in as expected, but EPS and margins will blowout.

 

I'm hoping to. 

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post #22 of 40
Quote:
Originally Posted by sog35 View Post
 

 

Well $900,000,000 revenue will be deferred for free software (iwork, ect) and free OS.  That takes out about 1% GM right there.  It still boggles my mind that it actual cost that much to develop OS and the software

 

It obviously does not cost that much, but there are other costs (distribution -- you have to keep quite a few servers running to serve out installs and updates, support, training), which apple is probably rolling into this figure. I am guessing the actual R&D and Q&A costs are about a third of the figure, and would be considerably smaller if Apple supported old hardware even less than they do already.

post #23 of 40
Quote:
Originally Posted by sog35 View Post

I'm tempering my expectations because Apple guided to 36.5-37.5% gross margin and they have been very accurate ever since they changed their method of not sand bagging guidance.  Q1'12 gross margin was 45% and Q1'13 was 38.6%.  So its very depressing that they guided to 37% for Q1'14 even though most think they have a higher margin lineup AND more unit sales.

They predicted in October, possibly expecting a greater mix of the iPad mini and 5C than ( it looks like) happened. I think the stock will be fine because their Q2 will include China. Forward guidance will be intersting.
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post #24 of 40
Quote:
Originally Posted by asdasd View Post


They predicted in October, possibly expecting a greater mix of the iPad mini and 5C than ( it looks like) happened. I think the stock will be fine because their Q2 will include China. Forward guidance will be intersting.

 

indeed. I also think they sold a lot more ipad air and ipad mini 1 than they expected and less ipad mini retina than expected. yet another factor that points toward better margins.

 

at 4:30 pm, the first number investors will see is EPS, so if you see the stock take off to 570-580 a few secs before CNBC announced the numbers it means EPS is good. imo we will have a huge spike around 580 follow by a retracement to around 560-570 when more details come in.

 

IF the stock tanks from the start, it means everything will be bad because if EPS is bad everthing else is going to be horrible.


Edited by herbapou - 1/27/14 at 12:14pm
post #25 of 40
I'm getting a little nervous as some people are throwing up ridiculous estimates. Ben Bajarin on twitter says he won't be surprised if iPhone number is 60M and iPad is 30M. Those numbers would shock me.
post #26 of 40
Originally Posted by Rogifan View Post
I'm getting a little nervous as some people are throwing up ridiculous estimates. Ben Bajarin on twitter says he won't be surprised if iPhone number is 60M and iPad is 30M. Those numbers would shock me.

 

If I don’t see a mountain range on the far horizon comprised entirely of iPhones, Apple is doomed.

post #27 of 40
Apple: doomed if they do, doomed if they don't.

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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post #28 of 40
Quote:
Originally Posted by Suddenly Newton View Post

Apple: doomed if they do, doomed if they don't.
Yep. I'm already seeing news reports from Blomberg & WSJ predicting that numbers won't be as good as expected. And if they are it doesn't matter because good news has already been "priced in to the stock".
post #29 of 40
Quote:
Originally Posted by Rogifan View Post


Yep. I'm already seeing news reports from Blomberg & WSJ predicting that numbers won't be as good as expected. And if they are it doesn't matter because good news has already been "priced in to the stock".

 

dont worry. its all about EPS growth.  If they can grow EPS 5-10% the stock will be $600 by March. 

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post #30 of 40

The numbers are in. 

 

HUGE results.

post #31 of 40
Quote:
Originally Posted by sog35 View Post

dont worry. its all about EPS growth.  If they can grow EPS 5-10% the stock will be $600 by March. 
Oh I'm in the stock for the long haul. The double standards just appall me. How come only good news from Apple is already priced into the stock? How come last quarter when Google reported good but not out of this world numbers the stock shot up over $100. Why wasn't good news already priced into their stock?
post #32 of 40
Ouch. Down 6% after hours... recovering slightly, but looks like Q2 will be flat compared to FY13. PE Stuck at 13 for eternity?
post #33 of 40
Stock down more than $30 after hours. The shorts are really having a field day.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #34 of 40
Quote:
Originally Posted by Quadra 610 View Post
 

The numbers are in. 

 

HUGE results.

 

Earnings YoY is flat ($13.1 B) but EPS up because of buyback.  EPS up 5%

 

Seems like only a new product will boost margins above 40% again

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post #35 of 40
Quote:
Originally Posted by aaarrrgggh View Post

Ouch. Down 6% after hours... recovering slightly, but looks like Q2 will be flat compared to FY13. PE Stuck at 13 for eternity?

 

if no EPS growth than yes

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post #36 of 40
Quote:
Originally Posted by Rogifan View Post


Oh I'm in the stock for the long haul. The double standards just appall me. How come only good news from Apple is already priced into the stock? How come last quarter when Google reported good but not out of this world numbers the stock shot up over $100. Why wasn't good news already priced into their stock?

 

Google is 90% owned by Wall street.

Apple only 60%

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post #37 of 40
Quote:
Originally Posted by sog35 View Post

Seems like only a new product will boost margins above 40% again
No, it seems more like the only way to reduce margins is to lower costs. It seems hard to "reward" Apple with the spaceship campus when revenue is essentially flat. At this point, the company is just worth its discounted free cash flow, and I am having a hard time imagining what can change that picture.

Presently, Apple is valued at a 10.4% discount rate assuming flat cash flow for the next 20 years.
post #38 of 40
Originally Posted by aaarrrgggh View Post
It seems hard to "reward" Apple with the spaceship campus when revenue is essentially flat. 

 

You’ve lost it.

post #39 of 40
Quote:
Originally Posted by sog35 View Post
 

 

Google is 90% owned by Wall street.

Apple only 60%

 

You are saying your pension fund is wall street? That's pretty silly. Institutional ownership = ownership by lots of ordinary people. 

post #40 of 40
Quote:
Originally Posted by aaarrrgggh View Post


No, it seems more like the only way to reduce margins is to lower costs. It seems hard to "reward" Apple with the spaceship campus when revenue is essentially flat. At this point, the company is just worth its discounted free cash flow, and I am having a hard time imagining what can change that picture.

Presently, Apple is valued at a 10.4% discount rate assuming flat cash flow for the next 20 years.

 

Since the 30 year bond is paying considerably less than that, that must mean that Apple is quite undervalued, no?

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