Wells Fargo: AAPL Q3 was Meh, but the Future Looks Bright

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Apple reported US$37.4 billion in revenue for its third fiscal quarter and 35.2 million iPhones sold, coming in below Wells Fargo analyst Maynard Um's expectation of $38.2 billion. That may be disappointing, but it doesn't spell certain doom for Apple because Mr. Um sees the upcoming fall product launches as a big boost for the company's performance.

Apple's Q3 iPhone sales missed Maynard Um's expectationsApple's Q3 iPhone sales missed Maynard Um's expectations

Along with $37.4 billion in revenue and 35.2 million iPhones sold, Apple reported $7.7 billion in earnings, plus 13.3 million iPads and 4.4 million Macs sold. iPhone sales were up 13.3 percent year-over-year and Mac sales were up 17.6 percent, but iPad sales dropped 9.2 percent.

Mr. Um told investors, "Of concern to us was the lack of iPhone unit growth though gross margin surprised us equally to the upside -- we gather it was related to accounting reversals."

He called the quarter "status quo," adding that gross margins saved Apple's numbers. Looking to Q4, Mr. Um expects we'll see new product launches including the next generation iPhone and the iWatch, Apple's jump into the smartwatch and wearable tech markets.

The new iPhone is expected some time in September and rumors say it will come with two larger display options at 4.7-inches and 5.5-inches. The iPhone 5 and iPhone 5S both include a 4-inch display. The still unconfirmed iWatch is expected to sync information with our iPhones and collect health and fitness data based on our daily activities.

Mr. Um lowered his fiscal 2014 revenue expectations from $181.4 billion with $6.34 EPS to $180.6 billion and $6.37 EPS. For fiscal 2015, Mr. Um is modeling $187.1 billion in revenue, up from $181.9 billion.

Mr. Um is maintaining his "Market Perform" rating for Apple's stock with a target range between $59 and $98. Apple is currently trading at $97.60, up 2.88 (3.04%).

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Comments

paikinho

Funny how analysis is always more pie in the sky than Apples own estimates.
Apple seems to nearly across-the-board be not meeting expectations of Analysts and for the longest time the stock has been tanking based on these lofty expectations.

My surprise today is that APPL stock is actually up. Given the usual pounding after the negative press of not meeting Analyst expectations, I would have expected it to go down.
Perhaps investors are refining their understanding of the accuracy of these Analysts to the true value of the information they seem to constantly be conflating.

RonMacGuy

LOL paikinho, you beat me to it.  I was about to post, “What the flying… Why is Apple stock up after missing Wall Street expectations…”

I think they are taking Apple’s hints about ‘great things coming soon’ to heart!!

vpndev

These analysts are so negative that if one of them dies and goes to heaven then he’ll complain that it’s only a single step above hell.

skipaq

AAPL took a brief beating on the news and some analysts will continue to hammer the stock. But there are some big things coming (pun intended) that will keep a floor under the price and drive it upwards. Plus I just don’t think you can discount the impact of APPL below $100 per share. It is more affordable for many investors.

aardman

I have a sneaking suspicion, or maybe just a hope, that 4Q comes around and the new iPhones will turn out to be mere icing on the cake. 

I expect a massive expansion and extension of the whole iOS/OSX ecosystem.  A roll out of complete sub-infrastructures implementing Homekit, Carplay, iWatch, iBeacons, an eWallet system, all tied to Siri, Touch ID, iCloud, and the new features in iOS and OSX, especially Continuity, Hand Off and Extensions.  A comprehensive, fully fleshed out secure platform that basically allows you to organize and manage all aspects of your day to day life using your iPhone.  That would be the only thing that would justify Eddie Cue’s claim that this year’s product introductions will be the biggest in 25 years.

aardman

Well, that or a perpetual motion machine.

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