Oppenheimer raises Apple target ahead of second quarter earnings
Research investment firm Oppenheimer on Friday raised its price target and estimates for Apple through the end of the fiscal year to reflect improving momentum across all the company's product lines and expectations of strong March quarter results.
Apple will release results of its second quarter ended March on Tuesday, April 20 at 2:00 p.m. PDT/5:00 p.m. EDT. On average, analysts polled by Thompson Financial expect the company to earn $2.42 per share on revenues of $11.96 billion, driven by sales of 2.7 million Macs, 9 million iPods and 6.8 million iPhones. Gross margin is forecasted to come in at 40%, or 100 basis points above management's guidance.
"We're raising our Apple estimates ahead of what should be strong March-quarter results [but] we believe the stock reaction will be positive but somewhat muted," Oppenheimer analyst Yair Reiner wrote in a research note to clients. "The first reason is that F2Q10 EPS upside will probably be kept in check by FX headwinds—a factor largely overlooked by the Street. The other mitigating factor could be Apple's hyperconservative guidance, which is likely to exclude the potential impact of the next iPhone release."
More specifically, Reiner:
raised his F2Q10 estimates to $12.4 billion in revenue and $2.54 in EPS from $12.2 billion and $2.40, respectively.
pushed his FY10 estimates to $56.0 billion in revenue and $11.98 in EPS from $54.2 billion and $11.46, respectively.
upped his FY11 estimates to $64.4 billion in revenue and $13.88 in EPS from $60.9 billion and $12.88, respectively.
increased his FY10 operating FCF estimate to $12.5 billion ($13.56/share) from $11.8 billion ($12.83/share).
Looking ahead to Apple's current third quarter, the analyst said the biggest swing factor will be the timing of the next iPhone release. "If it happens [by the end of June], Street estimates should be easily beatable," he explained. "If it slips to [the July-> September quarter], consensus will be tougher to top, especially on gross margin, which could suffer as high-margin iPhone sales slow ahead of a refresh."
Reiner's new estimates account for the conservative assumption that the next iPhone does not launch until the September quarter, adding that the conservatism seems warranted given the stress that the iPad has placed on Apple's supply chain and on the manufacturers of components shared by both the iPad and iPhone.
Still, he see's Apple as a long term value and therefore raised his price target to $285 from $265, saying he arrived at the target by applying his prior 18x multiple to his upwardly revised fiscal year 2011 NOPAT estimate of $13.52/share then added back $43 in cash per share taken from the company's bankroll.
Separately on Friday, Morgan Stanley analyst Katy Huberty noted that U.S. Mac shipment figures for Apple's March quarter out of Gartner and IDC paint two different pictures of the segment's performance, with the former indicating 1.4 million units (+34% year-over-year) and the latter suggesting 1.1 million units (+8% year-over-year). However, she said data from a third firm, NPD, shows Apple US consumer shipments rose ~30% year-over-year in the March quarter, implying that Gartner's numbers are closer to reality.
"[This gives] us more confidence in our [March quarter] Mac estimate of 3M units," she said.
Huberty's March quarter estimates also include $2.40 in per share earnings on revenues of $12 billion.
Apple will release results of its second quarter ended March on Tuesday, April 20 at 2:00 p.m. PDT/5:00 p.m. EDT. On average, analysts polled by Thompson Financial expect the company to earn $2.42 per share on revenues of $11.96 billion, driven by sales of 2.7 million Macs, 9 million iPods and 6.8 million iPhones. Gross margin is forecasted to come in at 40%, or 100 basis points above management's guidance.
"We're raising our Apple estimates ahead of what should be strong March-quarter results [but] we believe the stock reaction will be positive but somewhat muted," Oppenheimer analyst Yair Reiner wrote in a research note to clients. "The first reason is that F2Q10 EPS upside will probably be kept in check by FX headwinds—a factor largely overlooked by the Street. The other mitigating factor could be Apple's hyperconservative guidance, which is likely to exclude the potential impact of the next iPhone release."
More specifically, Reiner:
raised his F2Q10 estimates to $12.4 billion in revenue and $2.54 in EPS from $12.2 billion and $2.40, respectively.
pushed his FY10 estimates to $56.0 billion in revenue and $11.98 in EPS from $54.2 billion and $11.46, respectively.
upped his FY11 estimates to $64.4 billion in revenue and $13.88 in EPS from $60.9 billion and $12.88, respectively.
increased his FY10 operating FCF estimate to $12.5 billion ($13.56/share) from $11.8 billion ($12.83/share).
Looking ahead to Apple's current third quarter, the analyst said the biggest swing factor will be the timing of the next iPhone release. "If it happens [by the end of June], Street estimates should be easily beatable," he explained. "If it slips to [the July-> September quarter], consensus will be tougher to top, especially on gross margin, which could suffer as high-margin iPhone sales slow ahead of a refresh."
Reiner's new estimates account for the conservative assumption that the next iPhone does not launch until the September quarter, adding that the conservatism seems warranted given the stress that the iPad has placed on Apple's supply chain and on the manufacturers of components shared by both the iPad and iPhone.
Still, he see's Apple as a long term value and therefore raised his price target to $285 from $265, saying he arrived at the target by applying his prior 18x multiple to his upwardly revised fiscal year 2011 NOPAT estimate of $13.52/share then added back $43 in cash per share taken from the company's bankroll.
Separately on Friday, Morgan Stanley analyst Katy Huberty noted that U.S. Mac shipment figures for Apple's March quarter out of Gartner and IDC paint two different pictures of the segment's performance, with the former indicating 1.4 million units (+34% year-over-year) and the latter suggesting 1.1 million units (+8% year-over-year). However, she said data from a third firm, NPD, shows Apple US consumer shipments rose ~30% year-over-year in the March quarter, implying that Gartner's numbers are closer to reality.
"[This gives] us more confidence in our [March quarter] Mac estimate of 3M units," she said.
Huberty's March quarter estimates also include $2.40 in per share earnings on revenues of $12 billion.
Comments
Research investment firm Oppenheimer on Friday raised its price target and estimates for Apple through the end of the fiscal year to reflect improving momentum across all the company's product lines and expectations of strong March quarter results.
These analysts always underestimate Apple's performance. When will they learn?
The type size is simply impossibly small.
Please make an iPad version of your site for those of us with less than 20/20 vision.
Sent from my iPad.
These analysts always underestimate Apple's performance. When will they learn?
They are just being conservative and basing their initial forecasts on the company's official guidance which is typically low.
Oppenheimer is simply raising their forecast to what the "whisper" numbers are.
These analysts always underestimate Apple's performance. When will they learn?
It would seem that most people would be happy with a small underestimation - but Apple (until the last 6 mos) seems to get punished at the Market for not hitting Analysts goals. What ever happened to the guidance that a company gives?
Not sure where to post this but AI, have you tried reading this on an iPad?
The type size is simply impossibly small.
Please make an iPad version of your site for those of us with less than 20/20 vision.
Sent from my iPad.
You should use the contact link at the bottom of this page and email them. I'm sure this is the fastest way to get in touch with AI.
These analysts always underestimate Apple's performance. When will they learn?
They cover companies because their company owns shares, if they over shoot by too much and the stock drops they lose.
$300 looks possible by end of the year as iPod, iPad, iPhone 4G/ iPhone HD and Macs coalesce into a fireball of Apple madness.
And if rumours started churning about Apple launching a new product category in 2011, well, boy oh boy...
Apple products are kind of in the sweetspot of affordability across the world, I sense. I can't explain it but as the global economy picks up and credit starts flowing again more people are going for Apple gear and they're willing to buy into the "restricted" Apple ecosystem.
Not sure where to post this but AI, have you tried reading this on an iPad?
The type size is simply impossibly small.
Please make an iPad version of your site for those of us with less than 20/20 vision.
Sent from my iPad.
Send me your iPad so that I may investigate further, pls k thx.
Not sure where to post this but AI, have you tried reading this on an iPad?
The type size is simply impossibly small.
Please make an iPad version of your site for those of us with less than 20/20 vision.
Sent from my iPad.
That shouldn't be too hard to do ...
Not sure where to post this but AI, have you tried reading this on an iPad?
The type size is simply impossibly small.
Please make an iPad version of your site for those of us with less than 20/20 vision.
Sent from my iPad.
Put two fingers on the surface of your iPad. Spread your fingers. Read.
Not sure where to post this but AI, have you tried reading this on an iPad?
The type size is simply impossibly small.
Please make an iPad version of your site for those of us with less than 20/20 vision.
Sent from my iPad.
I read Ai on and off all day on my iPad and it is fine, tried rotating it horizontally?
Send me your iPad so that I may investigate further, pls k thx.
hahahah, good one.
Because, for the life of me, I can't understand how 300,000 macs makes the difference between sales of 8% YOY and 34% YOY. Oh well...
Man, I sure do suck at math.
Because, for the life of me, I can't understand how 300,000 macs makes the difference between sales of 8% YOY and 34% YOY. Oh well...
I am sure there's some rounding involved in the reporting. Perhaps the base was 1.02M, the old forecast number was 1.101M (rounded off to 1.1) and the new forecast number was, say, 1.37M (rounded off to 1.4M)......
I have a pet theory that a majority of the users out there really don't care one iota about OS updates and newer hardware. The sales of Android phones compared to iPhone sales would bolster that theory if iPhones still outsold Android phones in this quarter.
I'm curious how that 6.8 million iPhones for the quarter compares to the number of Android-based phones sold in the same quarter. And no, it's not a fanboy-type interest where I want to see Android fail or whatever. I'm just interested in how strongly the iPhone sells this far out from the last significant OS and hardware update compared to a phone platform that is coming off several high profile hardware releases and several significant, recent OS updates.
I have a pet theory that a majority of the users out there really don't care one iota about OS updates and newer hardware. The sales of Android phones compared to iPhone sales would bolster that theory if iPhones still outsold Android phones in this quarter.
Come June, your 1 year old 3GS can be updated to 4.0. Nothing stops phone manufacturers from updating their phones to the latest Android, except that they are too shortsighted to do so. They would rather create an incentive to buy a new phone, than allow updating old phones.
I think it is amazing that the 2G iPhone is still current except for a couple of features. How many phones can claim this?
Apple being slightly behind in software is a non-issue. As for hardware, yes there might be issues for some, who prefer the latest greatest, but even for them, Apple usually wins out because of usability. What good is a fancy phone if you struggle to get the best out of it.
Because we all know the Apple haters would love to cast Apple as under-performing.