iPhone 4 and iPad shortages could temper upside to Apple's earnings
Apple, which will disclose earnings for its fourth fiscal quarter of 2010 on Monday, is expected to report profits in-line with Wall Street's estimates but may face trouble besting those predictions with its usual degree of flair due to shortages of two of its hottest products throughout the quarter.
On average, analysts polled by Thompson First Call expect the Mac and iPhone maker to report earnings per-share of $4.03 on sales of $18.76 billion for the three-month period ending September. However, the Cupertino-based company has on average beat Street estimates by roughly 15% for the past 17 quarters, Piper Jaffray analyst Gene Munster noted in a report to clients Friday.
Assuming Apple achieved the same upside in the fourth quarter, it would stand to report earnings of $4.80 per share, according to the analyst. But he believes shortages of both the iPhone 4 and iPad during the quarter prevented the company from generating the revenue it would need to garner those additional profits.
"To get to $4.80 on $18.8b in revenue would require gross margin of 43%, well ahead of 39.1% in June, the Street's 38% September estimate and guidance of 35%," he explained. " The bottom line is the mix shift and revenue upside driven by the lower margin iPad (about 30% gross margin) significantly tempers EPS upside potential."
Munster's estimates are based on his expectations that Apple during the quarter shipped 11 million iPhones, 4.5 million iPads, 3.7 million Macs, and between 10 and 10.5 million iPods. Overall, those predictions are "slightly below the street," he admitted, "due to of uncertainty regarding the impact of supply shortages that we have monitored throughout the quarter, particularly with the iPad."
"[W]e believe Apple can't make iPhones fast enough, and the reported iPhone number in the September quarter will understate true demand," he continued. The analyst erred on the same side of caution with his iPad numbers, estimating sales of 200,000 units less than the Street average "because of uncertainty in the supply levels internationally."
"Bottom line," the analyst said, "while its hard to predict the stock action the day after Apple reports, we believe shares will move higher over the next 3 month. We believe investors will remain optimistic that the growth story can continue given the size of Apple's addressable markets combined with the company's relatively small market share."
Munster maintained his Overweight rating and $390 price target shares of Apple.
On average, analysts polled by Thompson First Call expect the Mac and iPhone maker to report earnings per-share of $4.03 on sales of $18.76 billion for the three-month period ending September. However, the Cupertino-based company has on average beat Street estimates by roughly 15% for the past 17 quarters, Piper Jaffray analyst Gene Munster noted in a report to clients Friday.
Assuming Apple achieved the same upside in the fourth quarter, it would stand to report earnings of $4.80 per share, according to the analyst. But he believes shortages of both the iPhone 4 and iPad during the quarter prevented the company from generating the revenue it would need to garner those additional profits.
"To get to $4.80 on $18.8b in revenue would require gross margin of 43%, well ahead of 39.1% in June, the Street's 38% September estimate and guidance of 35%," he explained. " The bottom line is the mix shift and revenue upside driven by the lower margin iPad (about 30% gross margin) significantly tempers EPS upside potential."
Munster's estimates are based on his expectations that Apple during the quarter shipped 11 million iPhones, 4.5 million iPads, 3.7 million Macs, and between 10 and 10.5 million iPods. Overall, those predictions are "slightly below the street," he admitted, "due to of uncertainty regarding the impact of supply shortages that we have monitored throughout the quarter, particularly with the iPad."
"[W]e believe Apple can't make iPhones fast enough, and the reported iPhone number in the September quarter will understate true demand," he continued. The analyst erred on the same side of caution with his iPad numbers, estimating sales of 200,000 units less than the Street average "because of uncertainty in the supply levels internationally."
"Bottom line," the analyst said, "while its hard to predict the stock action the day after Apple reports, we believe shares will move higher over the next 3 month. We believe investors will remain optimistic that the growth story can continue given the size of Apple's addressable markets combined with the company's relatively small market share."
Munster maintained his Overweight rating and $390 price target shares of Apple.
Comments
apple, which will disclose earnings for its fourth fiscal quarter of 2010 on monday, is expected to report profits in-line with wall street's estimates but may face trouble besting those predictions with its usual degree of flair due to shortages of two of its hottest products throughout the quarter.
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...fwiw
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iPad predictions seem really low to me. Even with the shortages I am expecting at least 7-8M.
Not sure about the iPhone but in my area the iPad always seems to be in stock. I was even at Target the other day and they were fully stocked with the iPad. Around here stores are already making the big Christmas push, its always interesting to see Halloween candy around the Christmas tree.
"This is not just a matter of giving a laptop to each child, as if bestowing on them some magical charm. The magic lies within -- within each child, within each scientist, scholar, or just plain citizen in the making. This initiative is meant to bring it forth into the light of day."
—Kofi Annan
http://wiki.laptop.org/go/The_OLPC_Wiki
Total OLPC sales 2007-2010 1,494,500\t \t
http://en.wikipedia.org/wiki/One_Laptop_per_Child
Apple’s iPad sold three million units in the first 80 days after its April release and its current sales rate is about 4.5 million units per quarter
http://www.businessinsider.com/the-a...-oct-6-2010-10
Watch this:
http://croquetweak.blogspot.com/2010...s-on-ipad.html
Isn't it about time...
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Exactly how much does Apple have to do to please Wall Street?
iPad predictions seem really low to me. Even with the shortages I am expecting at least 7-8M.
That might be a little high, but where I sit, it should be over 6MM. If it was any lower, it would be sold in more countries by now. We have it on pretty good information that production started at 1MM per month in March/April, ramped up to 2MM in May/June, and should be close to 3MM by now.
Some of the iPhone estimates seem insane though. I can't imagine Apple has made enough to sell 12+MM.
The intelligent, and mostly amateur, analysts are all way ahead of these silly estimates, and by now everyone surely knows who the true pro's are at predicting AAPL earnings...
It is going to be a blowout.
Details of all estimates by PED at Fortune: http://tech.fortune.cnn.com/2010/10/...llion-quarter/
Not sure about the iPhone but in my area the iPad always seems to be in stock. I was even at Target the other day and they were fully stocked with the iPad. Around here stores are already making the big Christmas push, its always interesting to see Halloween candy around the Christmas tree.
I think the reference was to the early shortages, not the current status since this is about Apples q4.
Kids and smart phones seem to be joined at the hip. From my observations, there are two kinds of young buyers, those who want iPhones and can afford them, and those who want them but can't afford them so have to settle for almost-as-good Androids.
As was pointed out to me a week or so ago, the iPhone and Android are about the same cost except for the BOGO offers. Either way the expensive part is the monthly contract.
As I type this AAPL is going through the roof--7.75 for the day. I have a block that I need to sell, and as a long time stockholder and watcher, my prediction is that if on Monday Apple exceeds expectations the stock will go down. If it falls short it will continue to go up. Such is the contrarianism that has always characterized this stock.
Dr Millmoss mentioned in another thread that Apple needs to beat the street by at least 10% for the stock to go up, and in previous quarters they managed to do it by 15%.
Going through some of the independent analysts' numbers (which top out around $5/share), I think there is room for a 15% beat again this quarter. The Wall Street people are concerned that Apple guided up so much already for the quarter that being to aggressive in their estimates might be too risky.
Personally, I can't imagine how Apple wouldn't be able to hit the Street high of $4.48. They did fantastic business through the back-to-school season. The holiday quarter might be harder to maintain the sequential growth rate, but the annual growth rate should still be over 40%.
I'll have to lighten my load of AAPL when it hits $325-330, but I still see it easily $400 within the next 12 months.
every 1/4 apple blows sales out of the water
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