Wall Street: Q2 earnings prove Apple is beginning 'international growth story'

Posted:
in AAPL Investors edited January 2014
After Apple announced record March quarter earnings of $11.6 billion, Wall Street watchers responded enthusiastically, with one analyst calling it proof of the beginning of an "international growth story" for the company.

The Cupertino, Calif., company reported a 94 percent rise in profits year over year for its second quarter of fiscal 2012 on sales of 35.1 million iPhones, 11.8 million iPads and 4 million Macs. The results were enough to give Apple its second-best quarter ever, behind only the most-recent holiday quarter.

Though analysts noted Apple's conservative guidance for the June quarter, they were generally upbeat about the company's future prospects, especially in international markets like China.

Piper Jaffray

In a note to investors late Monday, Gene Munster wrote that Apple's earnings beat was "proof that international growth story is just beginning." He pointed to the fact that iPhone sales in Greater China were up five times the year ago quarter as a key piece of evidence for this assertion.

"Our confidence that Apple can win with an iPhone in emerging pre-paid markets is greater than ever," he said.

Piper Jaffray adjusted its iPhone estimates to account for an expected October launch of the 2012 model, as previous estimates had reflected an August launch. The firm believes Apple will report shipments of 29 million iPhones in the June quarter.

Munster also noted that Apple has plenty of room for iPhone growth at home. He expressed belief that Apple's start of the smartphone market at carriers Verizon and AT&T could climb to 80 percent in the next year, up from 64 percent last quarter. Apple is also expected to benefit from the continued growth of total smartphone sales as consumers increasingly switch over from feature phones.

Piper Jaffray


Morgan Stanley

Analyst Katy Huberty told investors that Apple's better-than-expected results should return the focus to "upcoming product cycles and expanding China distribution."

Huberty said Apple's June quarter guidance implies shipments of 25-28M iPhones during the period. She lowered the firm's June and September quarter iPhone estimates to 27M and 26M, respectively, while noting that the sequential downtick is to be expected.

An 11 percent sequential increase in R&D expenses is a sign of "increased investments in new products," according to Huberty. "The last periods that Apple posted R&D growth this much above normal seasonality was two years prior to iPad introduction and 18 months prior to iPhone introduction," she said.

After extrapolating Apple's China revenue, the analyst projected that Apple's sales in the region could surpass the U.S. by the end of calendar 2013. Apple CEO Tim Cook revealed during a conference call on Tuesday that revenue in Greater China reached a record $7.9 billion, up three times from a year ago.

"It is mind-boggling that we can do this well," Cook said.

Apple began selling the iPhone 4S in China in January. The company also added its second carrier in the country in early March after China Telecom began selling the handset.

Morgan Stanley
Morgan Stanley risk-reward snapshot


Topeka Capital Markets

Brian White also issued a note on Tuesday declaring Apple as having blown through the firm's projections. "Apple fever rocks on, marching to $1,001," he wrote, referring to his 12-month price target.

He put forth the company's stock as having "meaningful upside potential" because of his expectations that Apple will release a next-generation iPhone, Apple television and "iPad mini" over the next year.

White also reiterated his note from earlier in the day that dismissed market concerns over AT&T and Verizon sales figures. AT&T revealed this week that iPhone activations had reached 4.3 million during the March quarter.

Apple CFO Peter Oppenheimer highlighted the strength of the company's overseas iPhone sales in an interview with Reuters on Tuesday. "International iPhone sales were on fire," he said.

J.P. Morgan

Mark Moskowitz viewed Apple's strong performance as affirmation that "end customer affinity toward Apple's optimized products continues to intensify." "In our view, Apple continues to defy the law of large numbers with ongoing momentum across all of its major product lines," he wrote.

According to the analyst, iPhone sales last quarter support the handset's "sustainable market leadership." He believes the results should allay investor fears of an iPhone-related slowdown.

The firm reiterated its Overweight rating of Apple and its December 2012 price target of $715. "Our revenue and EPS growth estimates position Apple as the lone star in large cap tech," Moskowitz said.

Evercore Partners

Analyst Rob Cihra reported early Wednesday that Apple had managed to beat even his "aggressive" estimates for the quarter. He called Apple's "ballooning" cash hoard of $110 billion "almost obscene" ahead of the company's plans to begin paying out a dividend and buying back shares of its stock.

As for the iPhone, Cihra expects a sequential decline for in the June and September quarters, followed by sales of an estimated 49 million iPhones in the holiday season after Apple releases a new model.

iPad sales fell short of Cihra's 13 million unit estimate, but he believes the June quarter will see a boost as Apple balances out supply and demand. He expects the iPad maker will sell 15-16 million units next quarter. The analyst also said he continues to "see prospects" for a mid-cycle iPad refresh this fall that could add introduce an A6 processor and a smaller 8-inch iPad.
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Comments

  • Reply 1 of 32
    cvaldes1831cvaldes1831 Posts: 1,832member


    It's worth pointing out that


     


    NONE OF THE AFOREMENTIONED THREE ARE TOP-RATED ANALYSTS ACCORDING TO STARMINE:


     


    Apple guidance: $32.5B revenue, $8.50 EPS


    Gene Munster: $38.31B revenue, $10.32 EPS


    Brian White: $37.02B revenue, $10.06 EPS


    Katy Huberty: $34.33B revenue, $9.63 EPS


     


    and let's throw in another AI favorite ANAL-yst...


     


    Shaw Wu: $36.78B revenue, $10.20 EPS


     


    http://tech.fortune.cnn.com/2012/04/23/trading-apple-before-earnings-no-shortage-of-free-advice/


     


    Actual numbers: $39.2B revenue, $12.30 EPS


     


    My own guess? $41B revenue, $12.25 EPS


     


    http://forums.appleinsider.com/t/149566/apples-iphone-accounted-for-78-of-at-t-smartphone-activations-in-q1-2012#post_2099993


     


    I blew doors on the four ANAL-ysts mentioned above in EPS prediction and came closer to revenue than three out of four of them.


     


    APPLEINSIDER IS DOING ITS READERS A DISSERVICE BY NOT MENTIONING WHEN PROFESSIONAL ANAL-YSTS ARE NOT TOP-RATED (FOUR OR FIVE STAR) FROM STARMINE.


     



    You can basically toss Munster, Wu, and Huberty's analyses into the circular file because they have a PROVEN TRACK RECORD OF BEING WRONG.

  • Reply 2 of 32


    dude, take a valium or something.

  • Reply 3 of 32
    aaarrrggghaaarrrgggh Posts: 1,608member
    ...

    You might be missing the point there. There is more to the game than the final numbers. Huberty is pretty much useless though. You should listen to divergent opinions to help create your own conclusions.
  • Reply 4 of 32
    realisticrealistic Posts: 1,154member


     


    Quote:

    Originally Posted by cvaldes1831 View Post


    It's worth pointing out that


     


    NONE OF THE AFOREMENTIONED THREE ARE TOP-RATED ANALYSTS ACCORDING TO STARMINE:


     


    Apple guidance: $32.5B revenue, $8.50 EPS


    Gene Munster: $38.31B revenue, $10.32 EPS


    Brian White: $37.02B revenue, $10.06 EPS


    Katy Huberty: $34.33B revenue, $9.63 EPS


     


    and let's throw in another AI favorite ANAL-yst...


     


    Shaw Wu: $36.78B revenue, $10.20 EPS


     


    Actual numbers: $39.2B revenue, $12.30 EPS


     


    My own guess? $41B revenue, $12.25 EPS


     


    I blew doors on the four ANAL-ysts mentioned above in EPS prediction and came closer to revenue than three out of four of them.





    Pat yourself on the back all you want but I'll still take Munster's projected results over yours any day! If you project close but lower, no harm everyone wins. It's when you project higher than actual results that harm is done because then the market perception may become that Apple missed some of their numbers and the stock drops.

  • Reply 5 of 32


    japan sale was pretty good too. tim cook mentioned it once in conference call. 

  • Reply 6 of 32
    godzillagodzilla Posts: 156member


     


    Quote:

    Originally Posted by Realistic View Post


     




    Pat yourself on the back all you want but I'll still take Munster's projected results over yours any day! If you project close but lower, no harm everyone wins. It's when you project higher than actual results that harm is done because then the market perception may become that Apple missed some of their numbers and the stock drops.



     


    Exactly.

  • Reply 7 of 32


    I won't say all analysts are useless when it comes to guidance, but certainly a good deal of them have consistently been SO wrong about Apple that I'm surprised they still have jobs.  But that reminds me that being right when it comes to the stock market has nothing to do with anything.  When you hear an analyst say they think Apple will miss projections, they're manipulating the market (or trying to) for their and their customers benefit.


     


    I get that, but their continued and consistent statements affirming Apple's imminent demise are ridiculous and they need to come up with some better reasoning for making any comments against Apple.  Sure, at some point, their negative comments may become true and they'll tout that they've been saying it all along (for the past 10 years) that they knew Apple would fail...


     


    Why is it that the newswire doesn't go back to look at things like this - see how these "analysts" predictions have been so off for so long?  I'd never put my money into the hands of a company that pays such analysts to make poorly thought out and blatantly wrong predictions like they have.  I'd rather go to a tarot card reader - chances are just as good that they'll be correct about Apple.

  • Reply 8 of 32


    Phillip Elmer-Dewitt over at http://tech.fortune.cnn.com/category/apple-2-0/ does an extensive analysis of the institutional(ized) analysts and bloggers. Here's this quarters stats: http://tech.fortune.cnn.com/2012/04/25/apple-q2-misses-high-and-low-but-the-best-bloggers-nailed-it/

  • Reply 9 of 32


    I suggest he takes several Valium.  However, it is an interesting paragraph:


     


    An 11 percent sequential increase in R&D expenses is a sign of "increased investments in new products," according to Huberty. "The last periods that Apple posted R&D growth this much above normal seasonality was two years prior to iPad introduction and 18 months prior to iPhone introduction," she said.


     


    And I do not think they all got raises in R&D image   Something is cooking to pacify all us Wonderkids with the "good" idéas.

  • Reply 10 of 32
    cvaldes1831cvaldes1831 Posts: 1,832member


    Wow, you guys really don't get it.


     


    My primary point is that AppleInsider should call out the accuracy of analysts it quotes, just like the inaccuracy of Digitimes is occasionally mentioned.


     


    For financial analysts, it should be pointed that this information is pretty easy to obtain. Philip Elmer-Dewitt at Fortune.com tracks analyst estimates as well as the aforementioned Starmine.


     


    If you want to take several points of view, sure, go ahead and read a few analysts' assessments, but this about Hargreaves or Moskowitz, not Wu/Munster/Huberty.


     


    Again, AI should be pointing out the historical accuracy of its analyst sources particularly when that information is readily available and important to consider when reading an analysis, just like they do for media.


     


     


    Okay, time for a cup of coffee.  image 


     


     

  • Reply 11 of 32


     


    Quote:

    Originally Posted by cvaldes1831 View Post

     like they do for media.


     


     


    Okay, time for a cup of coffee.  image 


     


     



    I sort of like that big font... I can read it without my glasses.


     

  • Reply 12 of 32
    Ok.... Analysts shmanalysts! They shorted the stock last week so they can make $$$ this week. They do it every time yet people somehow seem to forget it and debate for days who was right and who was wrong.
    Fugetaboutit! It's all a game,
  • Reply 13 of 32


    Originally "end customer affinity toward Apple's optimized products continues to intensify."


    Translation "the love for Apple's great products is still really growing."


     


    But maybe they're getting paid by the word syllable.


     


    PS. Man, what is it with the background color of my reply? I had to edit the code to remove the highlight...

  • Reply 14 of 32
    jcdinkinsjcdinkins Posts: 114member


    "Lighten up Francis."

  • Reply 15 of 32
    shaun, ukshaun, uk Posts: 1,050member


     


    Quote:


    Originally Posted by cvaldes1831 View Post

     


    Okay, time for a cup of coffee.



     


    Think you need to step away from the caffeine and go take a lie down lol

  • Reply 16 of 32
    shaun, ukshaun, uk Posts: 1,050member


    Looking at that graph it's somewhat ironic that since Steve's death last October the shares have rocketed.

     

  • Reply 17 of 32
    tundraboytundraboy Posts: 1,797member


    Pretty much all analysts in the US do not grasp how brand name conscious consumers in China are.  They look at per capita incomes and figure that surely not that many Chinese can afford an iPhone.  Wrong.  They are willing to spend a larger portion of their personal income on high-status consumer items.  And in China few brand names are as high-status as Apple.  BMW, Mercedes, the high fashion designers, etc. --they are beyond the reach of most people, but an iPhone is attainable.


     


    That's why Apple can afford to let negotiations with China Telecom (the biggest wireless carrier in China) drag.  They know they have the upper hand.  It's not as if they're in any immediate danger of losing the China Telecom smartphone customer to Android or Windows Phone.  Once they reach an agreement, it'll be like some one opened up the spigot.  No it'll be more like a fire hydrant.


     


    Thing is, I think the country where Apple has the least aspirational lustre is the U.S.  Think about what that means for Apple's potential in the overseas market.


     


     


     


     


     

  • Reply 18 of 32
    quinneyquinney Posts: 2,528member


     


    Quote:

    Originally Posted by tundraboy View Post


    Pretty much all analysts in the US do not grasp how brand name conscious consumers in China are.  They look at per capita incomes and figure that surely not that many Chinese can afford an iPhone.  Wrong.  They are willing to spend a larger portion of their personal income on high-status consumer items.  And in China few brand names are as high-status as Apple.  BMW, Mercedes, the high fashion designers, etc. --they are beyond the reach of most people, but an iPhone is attainable.


     


    That's why Apple can afford to let negotiations with China Telecom (the biggest wireless carrier in China) drag.  They know they have the upper hand.  It's not as if they're in any immediate danger of losing the China Telecom smartphone customer to Android or Windows Phone.  Once they reach an agreement, it'll be like some one opened up the spigot.  No it'll be more like a fire hydrant.


     


    Thing is, I think the country where Apple has the least aspirational lustre is the U.S.  Think about what that means for Apple's potential in the overseas market.


     


     


     


     


     



     


    I think you mean China Mobile, rather than China Telecom.

  • Reply 19 of 32
    sockrolidsockrolid Posts: 2,789member


     


    Quote:

    Originally Posted by AppleInsider View Post"The last periods that Apple posted R&D growth this much above normal seasonality was two years prior to iPad introduction and 18 months prior to iPhone introduction," she said.


     


    So what could be driving the spike in R&D expenditures this time?


     


    Let me guess:


    - Apple television


    - Apple wallet / NFC technology


    - Siri upgrades


    - Mapping technology upgrades


    - OS 11


    - MacBook Air transition to ARM


    - All of the above


     


    I'm thinking "All of the above."  image

  • Reply 20 of 32
    aaarrrggghaaarrrgggh Posts: 1,608member
    sockrolid wrote: »
    "The last periods that Apple posted R

    So what could be driving the spike in R&D expenditures this time?

    Let me guess:
    - Apple television
    <p style="margin-top:0px;margin-right:0px;margin-bottom:0px;margin-left:0px;padding-top:0px;padding-right:0px;padding-bottom:0px;padding-left:0px;">- Apple wallet / NFC technology</p>

    <p style="margin-top:0px;margin-right:0px;margin-bottom:0px;margin-left:0px;padding-top:0px;padding-right:0px;padding-bottom:0px;padding-left:0px;">- Siri upgrades</p>

    <p style="margin-top:0px;margin-right:0px;margin-bottom:0px;margin-left:0px;padding-top:0px;padding-right:0px;padding-bottom:0px;padding-left:0px;">- Mapping technology upgrades</p>

    <p style="margin-top:0px;margin-right:0px;margin-bottom:0px;margin-left:0px;padding-top:0px;padding-right:0px;padding-bottom:0px;padding-left:0px;">- OS 11</p>

    - MacBook Air transition to ARM
    - All of the above

    I'm thinking "All of the above."  :lol:

    To be honest, none of that could create that kind of increase as I understand it. More likely, it is the impact of acquisitions like anobit and how they impact accounting.
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