Apple Q1 2013 earnings preview: The pressure is on

Posted:
in AAPL Investors edited January 2014
Apple this Wednesday is expected to report record iPhone and iPad sales from the 2012 holiday season. But as investors are uncertain about the company's future, all eyes will be on CEO Tim Cook to ease those concerns.

Earnings


This Wednesday's earnings conference call has already been declared Apple's most important in a decade. The report arrives as AAPL stock has taken a significant hit in recent months, dipping below the $500 threshold.

The timing of Apple's selloff is particularly interesting, as the company just completed a holiday quarter that was likely the strongest in its history. Consensus calls for Apple to report $54.58 billion in revenue, which would be up from its previous record of $46.33 billion set in the holiday 2011 period.

But Apple's breakneck pace of growth has also shown signs of slowing. And new, cheaper products like the iPad mini have caused concern among investors that the company's gross margins will slip.

Rumors in recent weeks have also piled on the bad news for Apple, with claims that the company is cutting component orders for both its full-size 9.7-inch iPad as well as the new iPhone 5.

Investors hope that Cook will take the opportunity this week to address those recent rumors about waning demand for his company's products. Legally, Apple is unable to comment before Wednesday's earnings.

Earnings


Particular attention will also be paid to Apple's guidance for the March quarter. Any potential decreases in demand are expected to be seen in the company's second quarter of fiscal 2013, which is currently underway.

For the December quarter, investors have high hopes, with consensus calling for sales of 50 million iPhones and 23 million iPads. Those numbers would be up from sales of 37 million iPhones and 15 million iPads in the year-ago quarter.

But market watchers also expect Apple to sell 5 million Macs, down from 5.2 million a year ago. It's believed that production constraints with the new iMacs, particularly the 27-inch model, held back sales during the holiday shopping season.

iPod sales are also expected to fall from 15.4 million in the holiday 2011 season to 12 million at the end of 2012.

Margins for the first quarter of fiscal 2013 are expected to slide to 39.5 percent, affected by a major revamp of the company's nearly entire product lineup at the end of calendar 2012.

As for the March quarter, Wall Street consensus sees the company earning $46.9 billion in revenue with gross margins improving to 41.5 percent as production of new products improves.

Market watchers expect the company will sell 37.5 million iPhones, 18 million iPads, 4.2 million Macs, and 6 million iPods.

Earnings
Apple CEO Tim Cook and CFO Peter Oppenheimer.


What's not expected from Cook and other Apple executives this week are comments on rumors that the company plans to expand the iPhone lineup this year in an effort to ward off less expensive handsets running Google's Android platform. Some rumors have claimed Apple will launch a low-cost iPhone this year designed to be sold contract-free in emerging markets such as China.

However, Apple is a notoriously secretive company that does not talk about its future product pipeline. Questions about rumors and future products asked by analysts during the company's earnings calls are routinely shot down by Cook and Apple CFO Peter Oppenheimer.

Apple will report earnings for the first quarter of fiscal 2013 this Wednesday after the market closes. The company will follow up with a conference call with analysts and the media at 5 p.m. Eastern, 2 p.m. Pacific. AppleInsider will have full, live coverage of the event.
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Comments

  • Reply 1 of 54
    Apple earnings will blow away expectations.

    Apple sold everything that they made and could not keep up with demands.

  • Reply 2 of 54
    philboogiephilboogie Posts: 7,500member
    When will AppleInsider change that narcissistic thread started by 'Kasper's Automated Slave' and replace it with the authors' name?

    Oh yeah, the topic at hand. Hmm, nothing to say till Wednesday; speculate all you want but no one will ever get it right; close at best.
  • Reply 3 of 54
    neilmneilm Posts: 658member
    I imagine that, as usual, analysts will once again express disappointment at Apple's failure to invent time travel or cure cancer.
  • Reply 4 of 54
    jragostajragosta Posts: 10,473member
    Apple earnings will blow away expectations.

    Apple sold everything that they made and could not keep up with demands.

    But there were some supply restrictions, as well.

    Frankly, I don't know if Apple's going to beat expectations or, if they do, by how much. And I really don't care. Even if Apple's profits were HALF of what they are, the share price is too low. Their cash adjusted forward P/E is in the low 7s - which is totally ridiculous for the performance they've been generating.
  • Reply 5 of 54
    OMFG. Margins will slip to 39%? How can a company survive on such razor thin margins /S
  • Reply 6 of 54

    Quote:

    Originally Posted by jragosta View Post





    But there were some supply restrictions, as well.



    Frankly, I don't know if Apple's going to beat expectations or, if they do, by how much. And I really don't care. Even if Apple's profits were HALF of what they are, the share price is too low. Their cash adjusted forward P/E is in the low 7s - which is totally ridiculous for the performance they've been generating.




    If Apple doesn't meet or beat expectations the share price might suffer... but that's just a buying opportunity. Apple's problems are problems that all companies would love to have... too much demand for too little product... and that's fixable (the opposite is also fixable but infinitely harder to do).

  • Reply 7 of 54


    Analysts: If they do not do well, they must be in a death spiral. If they do well, there is nowhere to go but down.


     


    A twist on an old saying: Continuing to make lots of money is the best revenge.

  • Reply 8 of 54
    ecsecs Posts: 307member
    iOS used to save the day, and maybe it still does, although it won't last forever. The Mac is the real value in the long term.
  • Reply 9 of 54
    gazoobeegazoobee Posts: 3,754member


    I like the way these stupid articles are always phrased as if the investors are actually important and that Apple should actually listen to what they say or do what they want to do.  This has to be one of the biggest myths of Capitalism in general.


     


    "The pressure is on!!!" Is it?  Why does Apple have to please anyones (seriously mistaken and poorly thought out) expectations?  Have they ever been right before?  Why do they *have* to hit performance measures that are just inexpertly calculated guesses by outsiders who don't even have access to the companies basic financial information?  


     


    Especially in the case of Apple, if they actually did this (do what the investors want or expect), they would be  POS company headed rapidly for the toilet.  


     


    Apple will keep on running itself the way it wants and you can invest or not.  The day they actually care about the investors and stock holders and what they think about anything is the day you'll know the ride is over and you should sell all your Apple stock.  

  • Reply 10 of 54

    Quote:

    Originally Posted by AppleSauce007 View Post



    Apple earnings will blow away expectations.



    Apple sold everything that they made and could not keep up with demands.

     


    Let's just not hope it's because of production problems, e.g. the iMac


     


     


    41.5% margins for the next quarter? I don't think so. Apple has stated that margins are going down in the past, and if these analysts are saying the iPad mini is going to take some share away from the full sized iPad, (and mac mini production will go to the US?) I don't think margins are going to go back up. This will be one of the excuses for poor outlook.


     


    Really hoping that they'll hint at what's coming to help with the share price. Apple is going to be fine, but this huge drop in the share price isn't good for he company image IMO (or my savings).

  • Reply 11 of 54
    "But as investors are uncertain about the company's future"

    Who, what, how, ....what the f... are you talking about?
  • Reply 12 of 54
    dm3dm3 Posts: 153member
    Wow. These estimates have not come down at all, or maybe gone even higher, as the stock drops from $705 to $495.

    WOW. So if they miss expectations, obviously the stock should drop further?

    This makes no sense. Big disconnect between wall street guesses, I mean estimates, vs. the stock performance.
  • Reply 13 of 54
    slurpyslurpy Posts: 5,194member

    Quote:

    Originally Posted by ecs View Post



    iOS used to save the day, and maybe it still does, although it won't last forever. The Mac is the real value in the long term.


     


    Do you honestly believe that? Do you even have an inkling of how small Apple's Mac sales/revenues/profit compare to their iOS line? Do you honestly believe the mac is the 'future' of Apple? Do you realize that mac sales are pretty much flat, compared to the exponential growth of the iPhone/iPad? Do you suddenly expect this trend to reverse, and one day for Mac sales to just suddenly explode while iOS sales shrink?  I'm actually curious, because if someone sincerely believed this, I'd find it stunning. 

  • Reply 14 of 54


    Some pretty solid thinking on Apple, that cuts through the noise/bs, here: http://aswathdamodaran.blogspot.com/2012/04/apple-holding-versus-folding.html

  • Reply 15 of 54
    slurpy wrote: »
    ecs wrote: »
    iOS used to save the day, and maybe it still does, although it won't last forever. The Mac is the real value in the long term.

    Do you honestly believe that? Do you even have an inkling of how small Apple's Mac sales/revenues/profit compare to their iOS line? Do you honestly believe the mac is the 'future' of Apple? Do you realize that mac sales are pretty much flat, compared to the exponential growth of the iPhone/iPad? Do you suddenly expect this trend to reverse, and one day for Mac sales to just suddenly explode while iOS sales shrink?  I'm actually curious, because if someone sincerely believed this, I'd find it stunning. 

    I actually have to side with you on this one, at least on the surface. The opportunity with Macs is to go against all of the cloud BS and manage things on your own. Paying $10-20/month for an online storage system is silly if you have a fast pipe and unlimited data on your internet pipe... but, it saves the hassle of dealing with local security. (Instead, it gives up any and all sense of security on the shared data.) Arguably, Apple should focus on an appliance line of computers that solve specific problems for people and work well together, but don't try to be an end-all, be-all for everyone.
  • Reply 16 of 54
    We all know Wall Street is a casino. Their wish list is nothing shy of insanity. The consumer can only buy so much. So when Apple or any other public company doesn't measure up they crucify them. It is insane!! Wall Street makes these bets ahead of time and then puts the full court pressure on these companies prior to earning reports.
    In the end Wall Street could even get Tim kicked out, find another CEO. Happens all the time.
    Look at Palm. Company was broken up into hardware and software then finally sold off to them clowns at HP.
    Bottom line: Greed.
  • Reply 17 of 54
    jragostajragosta Posts: 10,473member
    Some pretty solid thinking on Apple, that cuts through the noise/bs, here: http://aswathdamodaran.blogspot.com/2012/04/apple-holding-versus-folding.html

    I used to say that there was no reason for a stock split, but I've changed my mind. About 68%$ of AAPL shares are owned by institutions - compared to something like 12% of all stocks. Institutions are far too likely to play "must sell to lock in gains before year end" games as well as other short term thinking. AAPL should split 10:1 so that individuals find it a more accessible stock.

    Of course, the SEC needs to investigate for manipulation, as well. It is just not plausible to me that the endless negativism hasn't been fed by people with a vested interest in seeing the stock fall.
    dm3 wrote: »
    Wow. These estimates have not come down at all, or maybe gone even higher, as the stock drops from $705 to $495.

    WOW. So if they miss expectations, obviously the stock should drop further?

    This makes no sense. Big disconnect between wall street guesses, I mean estimates, vs. the stock performance.

    There has always been such a disconnect. There was a report a year or two ago that showed that Apple consistently beat its guidance by around 10-15% - yet the analysts were always surprised when Apple failed to meet their insane lofty estimates.

    Not to mention that in the climate that has been generated about AAPL, even trivial negative news makes the stock drop by unreasonable amounts. Some of the big analysts said on Friday after close that Apple's iPhone sales were still strong - and the stock went up about 0.3 points. After this story hits the street, the stock is down 4.5 points. Negativism sells - and causes people to sell.
  • Reply 18 of 54
    chiachia Posts: 701member

    Quote:

    Originally Posted by jragosta View Post

    Even if Apple's profits were HALF of what they are, the share price is too low. Their cash adjusted forward P/E is in the low 7s - which is totally ridiculous for the performance they've been generating.




    Originally Posted by island hermit View Post

    If Apple doesn't meet or beat expectations the share price might suffer... but that's just a buying opportunity.




    Originally Posted by JollyPaul View Post

    Analysts: If they do not do well, they must be in a death spiral. If they do well, there is nowhere to go but down.


    A twist on an old saying: Continuing to make lots of money is the best revenge.





    Originally Posted by Gazoobee View Post


    I like the way these stupid articles are always phrased as if the investors are actually important and that Apple should actually listen to what they say or do what they want to do.  This has to be one of the biggest myths of Capitalism in general.


     


    "The pressure is on!!!" Is it?  Why does Apple have to please anyones (seriously mistaken and poorly thought out) expectations?  The day they actually care about the investors and stock holders and what they think about anything is the day you'll know the ride is over and you should sell all your Apple stock.  



     


     


    Maybe Apple's long term target for acquisition is, itself.  Buying itself removes the influence of large investors who may not have the company's long-term welfare at heart.


     


    I, being cynical, feel the share price will then rapidly rise to reflect its true value when such a move is announced...

  • Reply 19 of 54


    The Pressure is on?


     


    We're talking about last quarter's totals. What pressure? The only pressure is future productivity, not past productivity.

  • Reply 20 of 54
    zoetmbzoetmb Posts: 2,491member

    Quote:

    Originally Posted by Hakime View Post



    "But as investors are uncertain about the company's future"



    Who, what, how, ....what the f... are you talking about?


     


    Yes, don't you know that Apple's future is tenuous?      How dare Apple mismanage the company to have a record quarter and (by September) $156 billion in cash.     What incompetency!    When Apple can't keep products in stock, the market panics (supply chain problems).   When Apple can keep products in stock, the market panics (demand must be down).        


     


    Analysts complain that Apple's products aren't inexpensive enough and yet when Apple releases new products with slightly lower margins, they freak out.     They expect Apple to do something that no company has ever done:   release a totally new type of product every year.  Most companies are thrilled to have done this once in the life of the company and most will never do it at all.   Apple has done it with the iPod, iPhone and iPad.      Furthermore, when Apple creates a new product category and then competitors swarm in, analysts panic because Apple no longer carries a monopoly in the market.    Well gee whiz, you mean Apple has to compete and it won't have 100% of the market?   The horrors.    


     


    My bet is that Apple announces a record quarter, the stock rises 3% for one day and then falls back.     If it falls back much more, Apple should simply start buying back its own shares.    Apple's stock price fall from $700 to $500 demonstrates that analysts and investors have no idea what they're doing.   Is Apple worth 29% less than it was when it was $700?    Ridiculous.  Maybe those analysts and investors disappointed with Apple should buy Facebook. 

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