Analyst: Higher Costs, Free Cases to Impact AAPL

| Apple Stock Watch

Apple’s third quarter revenue beat analyst expectations and the company’s own records, and there’s still plenty of growth ahead. In the near term, however, higher parts prices and the cost of giving away free iPhone 4 cases will have an impact on the company’s profits, according to Gleacher & Co. analyst Brian Marshall.

“We are conservatively adjusting our future gross margin profile lower due to: 1) higher costs associated with the iPhone 4 and iPad, and 2) revenue deferral impact associated with the bumper give-away due to Antennagate,” Mr. Marshall said.

Apple’s revenue deferral for its free iPhone 4 case program could “negatively impact the overall gross margin in September 2010 by 100bps, but should reverse in December 2010,” according to Mr. Marshall’s projections.

Apple reported record revenue for its June quarter at US$15.7 billion, with earnings of $3.25 billion and earnings per share of $3.51. Those results were helped in part by record Mac unit sales of 3.47 million, as well as 8.4 million iPhones, 9.41 million iPods, and 3.27 million iPads.

Looking forward, Mr. Marshall is modeling revenue at $18.537 billion for Apple’s September quarter, above the company’s $18 billion guidance. He expects Apple will report a 38 percent gross margin, and an EPS of $4.05.

For calendar 2011, Mr. Marshall is estimating Apple will pull in $81.872 billion, show a 37.3 percent gross margin, and an EPS of $17.25.

Mr. marshall is maintaining his “Buy” rating for Apple’s stock, but lowering his target price to $345 from $370. Apple is currently trading at $258.03, up 3.79 (1.49%).

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5 Comments Leave Your Own

Lee Dronick

The way I see it the free cases are sacrificial anodes. You spend a little bit of money on them now so that you don’t spend a lot of money on repairs later. Otherwise potential iPhone buyers, and “current” owners, may choose a competing product.

Tiger

at maybe $.20 per bumper, we’re still talking chump change for a company sitting on $42B in cash.

Other analysts have now raised their target price to $400. He’s lowering it. Should be interesting to see what happens.

Steve Hokenson

An impact? Apple has $44 billion dollars in the bank - just for fun. How can including a free bumper have much of an impact? They’re selling every iPhone 4 and iPad they can make, as fast as they make them.

davebarnes

“sacrificial anodes” = brilliant observation.

At maybe $2 a bumper (not $0.20) it will cost Apple $20M. Does not even deserve a footnote. Oh, I know we should look at lost revenue, but seriously, this is chump change to Apple.

Constable Odo

These analysts are all over the place with their target prices.  What a waste of time and energy.  What do they even matter?  Apple can’t even meet the lower targets, so the high ones are practically useless.  Target prices don’t reflect the overall economy and Apple is just a part of it.  Hedge fund manipulation is more powerful than any target price.  It won’t make a difference if more analysts lower their target prices down to around $320 or so.  It looks ridiculous to have some $140 gap between current and target price for Apple.  It’s more like wishful thinking.

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