Analyst Sees Q4 Apple Upside, Surprise Guidance for Q1

| Apple Stock Watch

UBS analyst Maynard Um is expecting Apple to turn in results for the September quarter (Apple’s fiscal 4th quarter) that are better than his own forecast when the company reports results on Monday, October 18th. He also believes that Apple could surprise investors with its guidance for the December quarter.

Apple is known for offering very conservative guidance and then beating those estimates handily. It’s become somewhat of a game for analysts and other AAPL watchers to predict just how well Apple will do ahead of its earnings reports.

For the September quarter, for instance, Apple surprised most everyone by offering guidance of US$18 billion in revenue — more than $2 billion higher than the company’s best quarter — and earnings per share of $3.44.

Still, knowing Apple’s tendency for conservative guidance, Wall Street’s consensus estimates are that Apple will turn in revenues of $18.8 billion and EPS of $4.06. Mr. Um’s own forecast is for $18.5 billion in revenue and $4.00 EPS.

Despite those higher-than guided estimates, however, in a research note to clients obtained by The Mac Observer, Mr. Um wrote, “We are expecting another strong quarter with upside to revenue and EPS estimates. Sales should be driven by strong iPhone demand and iPad & iPod to a lesser degree.”

He also thinks that an easing in component prices could result in higher-than-expected gross margins for Apple.

Looking forward, he said, “With continued momentum in all product lines as well as easing supply constraints for both iPhone and iPad, we see the potential for Apple to surprise to the upside on guidance again.”

He added, “We expect Apple’s broad line-up to include highly sought after products during the holiday season, which should translate into continued growth momentum.”

Mr. Um maintained his “Buy” rating for AAPL and reiterated his $350 target price.

AAPL closed at a record high for the 6th straight session, ending the day at $314.74, up $12.43 (+4.11%), on heavy volume of 32.8 million shares trading hands.

AAPL Chart for 10/15/2010

Yahoo! Finance AAPL Chart for 10/15/2010

*In the interest of full disclosure, the author holds a small share in AAPL stock that was not an influence in the creation of this article.

Comments

Constable Odo

Apple has to continually prove it can do more and more and even when they do it there are always doubts.  Google didn’t say anything and just blew everything out at earnings for a 10% share pop.  Google just sits back and makes easy money.

Why is it so easy for Wall Street to believe that Google is easily worth $600 a share and so hard for them to believe that Apple could be worth $300 a share?  It makes no sense at all.  Maybe Apple should get into the search business.  Hopefully iAd will help Apple gain some value credibility next year.  Apple is changing the computer industry just as much as Google is and driving component manufacturing, too.  That should be worth something.  Apple shares better get some share pop of at least 5% come earnings.

jfbiii

Actually the Street values Apple very highly. Their market cap is second only to Exxon Mobile. At $600 a share, Google has a smaller number of shares outstanding than Apple does. It’s market cap is only about $188 billion, while Apple’s is roughly $286 billion.

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