Where is AAPL headed for Q3 and Q4 2010?

  • Posted: 22 May 2010 03:33 PM

    These are my price targets of AAPL for the balance of its fiscal year ended Sept. 2010.  Of course, we don’t yet know the EPS for Q3 and Q4, but I think these graphs depict reasonably achievable results.  Estimating EPS is far less volatile than any P/E ratio in the valuation of the stock, so that’s your job.  Apple, as a growth company, should be closer to a P/E of 25, but Wall Street isn’t listening.  Perhaps Steve Jobs could email Jeff Bezos and learn what sort of magic occurs to produce AMZN’s P/E ratios north of 50.  We would all be richer for it!

    My early estimates of EPS #s that complete the quarters to fill out 12 months of trailing earnings in each graph: Q3 2010:  $3.70 Q4 2010:  $4.85

         
  • Posted: 22 May 2010 03:54 PM #1

    You’re estimating eps for the fiscal year of $15.55 or an increase of about 71% over the prior year. What are you estimating for iPhone units in Q3 and Q4? In all moving a bit above a p/e of 20 puts the share price in late July at about my target of $300 per share.

         
  • Posted: 22 May 2010 04:10 PM #2

    DawnTreader - 22 May 2010 06:54 PM

    You’re estimating eps for the fiscal year of $15.55 or an increase of about 71% over the prior year. What are you estimating for iPhone units in Q3 and Q4? In all moving a bit above a p/e of 20 puts the share price in late July at about my target of $300 per share.

    iPhone units are going to be a wild card, depending on when the 4G first becomes available.  Nonetheless, I’m estimating 8.875m units for Q3.  For Q4, I’m at 9m units.  Obviously, my assumptions are large for Q4, but with production ramping for the iPad that could cover actual, lower iPhone unit sales, I don’t believe I’m overly optimistic, barring larger events affecting Apple and the overall market.

    I think the $15.56 EPS for fiscal year end Sept. 30 2010 can be achieved.  If the P/E’s hold up, or even grow, we can do very well. Again, Mr. Market is the biggest wild card, but even at a P/E of 20, Apple may be putting in a floor near $300 after Q4 2010.  With expected EPS growth for Q3 and Q4, we can hope for P/E’s above 20, but I’m not counting on it.  Nor do we need to, given the EPS #s projected.

    I think the 4G is going to be a HUGE upgrade, and 20m iPhones combined for Q3 & Q4 is not an unrealistic possibility.  Add the iPad #s, and you’ve got the makings for some heavy EPS #s.

    [ Edited: 22 May 2010 04:16 PM by ByeTMO ]      
  • Posted: 22 May 2010 04:35 PM #3

    Mercel - 22 May 2010 07:10 PM
    DawnTreader - 22 May 2010 06:54 PM

    You’re estimating eps for the fiscal year of $15.55 or an increase of about 71% over the prior year. What are you estimating for iPhone units in Q3 and Q4? In all moving a bit above a p/e of 20 puts the share price in late July at about my target of $300 per share.

    iPhone units are going to be a wild card, depending on when the 4G first becomes available.  Nonetheless, I’m estimating 8.875m units for Q3.  For Q4, I’m at 9m units.  Obviously, my assumptions are large for Q4, but with production ramping for the iPad that could cover actual, lower iPhone unit sales, I don’t believe I’m overly optimistic, barring larger events affecting Apple and the overall market.

    I don’t see the iPhone numbers as optimistic and perhaps even a bit low for FQ4 considering the anticipated global appetite for the next generation iPhone.

         
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    Posted: 22 May 2010 04:41 PM #4

    I think you could be conservative for iPhone units in Q4.  There are millions of iPhone 3G owners to account for in addition to new iPhone owners, it’s more a question of whether they will mostly upgrade at launch (which should be in Q3) or fiscal Q4.

    Q4 and Q1 2011 could have unit sales in excess of 10 million.  A $99 iPhone 3GS would be a better smartphone pick than any of the Android devices out there in that price class, since it’s a Cortex-A8 based phone, and is a much more compelling “budget iPhone” than the iPhone 3G.  Apple has many more distribution points this year. 

    Q3 stands a chance of being a blockbuster iPhone quarter as well, but to get anywhere near 10 million units, Apple would probably need to start selling the new iPhone in early/mid June and have one heck of a product ramp-up.  A Verizon or other US carrier partnership wouldn’t hurt either.

    Between iPhone and iPad, iPhone will probably be the more important driver of AAPL’s share price in the next few months.

    [ Edited: 22 May 2010 04:43 PM by Mav ]

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  • Posted: 22 May 2010 04:52 PM #5

    Mav - 22 May 2010 07:41 PM

    I think you could be conservative for iPhone units in Q4.  There are millions of iPhone 3G owners to account for in addition to new iPhone owners, it’s more a question of whether they will mostly upgrade at launch (which should be in Q3) or fiscal Q4.

    Q4 and Q1 2011 could have unit sales in excess of 10 million.  A $99 iPhone 3GS would be a better smartphone pick than any of the Android devices out there in that price class, since it’s a Cortex-A8 based phone, and is a much more compelling “budget iPhone” than the iPhone 3G.  Apple has many more distribution points this year. 

    Q3 stands a chance of being a blockbuster iPhone quarter as well, but to get anywhere near 10 million units, Apple would probably need to start selling the new iPhone in early/mid June and have one heck of a product ramp-up.  A Verizon or other US carrier partnership wouldn’t hurt either.

    Between iPhone and iPad, iPhone will probably be the more important driver of AAPL’s share price in the next few months.

    My assumption is that the 4G will be available earlier this June, reporting sales in Q3, slicing off some unit sales of Q4.  If you look at things cumulatively at the end of Q4, we get to the same place, unless you think Apple sells more than 18m iPhones for combined Q3 and Q4.

         
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    Posted: 22 May 2010 05:41 PM #6

    I think 20m iPhones is a distinct possibility for that time period.  Q4 ‘09 iPhone sales with the 3G/3GS mix were 7.4 mil., and I’d expect significant YOY growth in the new iPhone’s first full quarter of availability, particularly if major new carriers are added anywhere in the world.

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  • Posted: 22 May 2010 08:04 PM #7

    In tallying your iPhone numbers I get 17.875 million units versus 12.575 million units in FY ‘09. You expect YOY unit sales growth to slow to 42%?

         
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    Posted: 22 May 2010 09:11 PM #8

    It’s a little “out of context” because it’s less than a full year, there’s an unknown buying pause effect, we don’t know for sure if the new iPhone will have a meaningful amount of time to launch in Q3, etc.

    But I do think that we should see something closer to 20 million iPhones sold during those quarters, which represents 59% YOY growth.  60%+ growth seems quite achievable, really.  By my back-of-the-napkin estimate, there could be well over 10 million iPhone 3G users who either are just about to become eligible for a fully subsidized upgrade, or who were waiting around ‘til next month (like myself).  Hundreds of thousands more iPhone 3G users around the world will be added to the “upgrade eligible without penalty” ranks every month.  I think we can safely assume that the “reup” rate will be very, very high based on customer satisfaction numbers (90%+, I’d guess).  The regular upgraders alone (avg. 18-month eligible upgrade cycle) will drive huge sales over the next couple of quarters. 

    The higher-monthly-bill 3GS users on a 12-month-ish upgrade cycle will represent a nice chunk of upgrade sales as well.  All together, not a bad base to build on.

    [ Edited: 22 May 2010 09:24 PM by Mav ]

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  • Posted: 22 May 2010 09:24 PM #9

    In FQ 1 we had a 100% increase in iPhone unit shipments. In FQ 2 it was 131% and in FQ3 ‘09 it was (we won’t go there - 626%). Why do you think think the rate of growth experienced over the last two quarters will slow so dramatically?

         
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    Posted: 22 May 2010 09:32 PM #10

    If you’re asking me? 

    I actually happen to think the issue of iPhone market uptake will be more a matter of supply constraint/ramp-up than anything else.  My pie-in-the-sky, “personal whisper number” for the next two fiscal quarters is 25 million iPhones sold.

    For my 20 million “estimate”, I’ve built in a little bit of “skepticism” that Apple will either be able to, or will want to, ramp up its A4/derivative SoCs-for-iPhone and/or its “roll your own” battery technology to a 40-60 million/yr. unit run rate right away, since both are increasingly proprietary technologies (and it wants to have enough A4s for the iPad).  I also lowered my “estimates” based on the new wave of economic uncertainty gripping the world.  I don’t think that Greece is the domino that starts 2008-09 all over again, but Wall Street and Main Street both seem pretty spooked.  Upgraders see the value, but will new customers necessarily be as willing to step up to an iPhone and the higher monthly bills it entails?  If they already bought an iPad?  I admit that a Verizon iPhone could mitigate this impact to a significant degree.

    Apple will not become a Nokia-volume seller overnight and that’s not it’s immediate plan anyway.  Also, let’s not forget that a “mere” 60% increase in sales for iPhone will probably translate to something like a 75-80% or more boost in EPS for the iPhone segment.

    [ Edited: 22 May 2010 09:35 PM by Mav ]

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  • Posted: 22 May 2010 09:52 PM #11

    My estimates for iPhone units were influenced by two factors: 

    1.  Competition.  The Android phones have taken root.  With all the handset manufacturers eager to push this platform out, these smart phones will take market share away in #‘s greater than they could a year ago. I’m also not assuming Verizon gets the iPhone before the end of Q4 2010. 

    2.  Conservatism.  I think Apple can do 20+m 4G phones Q3 and Q4.  But the EPS #s I’ve estimated don’t require it, providing some confidence and comfort level that we don’t have to rely on a heavy P/E # to give us $300 per share.  The fact that you’re questioning unit sales at this level (as being low) is a good thing: An upside surprise is always welcome.

    [ Edited: 22 May 2010 11:34 PM by ByeTMO ]      
  • Posted: 24 May 2010 07:49 AM #12

    adamthompson3232 - 24 May 2010 06:56 AM

    http://www.macrumors.com/2010/05/23/sprint-to-also-get-iphone-this-year/

    sorry, here is the link.

    Morgan Stanley may be thinking along similar lines, as Katy Huberty just upped her estimate to $310 with the possibility of $400 if Verizon get the iPhone.  See here

         
  • Posted: 26 May 2010 01:52 AM #13

    adamthompson3232 - 26 May 2010 04:13 AM

    If this is true, I believe it is very safe to assume that AAPL will hit $300 sooner than most people here think….unless the market really takes a dive from here, which I think is unlikely in the next six months and I believe AAPL gets to $300 by July.

    AAPL $300 by July? Been there. See my updated forecast from 04/24/10grin

         
  • Posted: 26 May 2010 02:35 AM #14

    adamthompson3232 - 26 May 2010 05:18 AM

    Sorry DT. Not trying to steal your thunder! It just seems so obvious that if the market doesn’t kill us, the iPad and “iPhone HD” will get us to $300 in short order. I get a little worried when a stock with a market cap as large as AAPL (or anything even close) seems like such a no brainer but the analysts are so friggin low in iPad estimates and I am a strong believer that the iPhone is coming to VZ (and Sprint) sooner than most people think.

    As I hoped the graphs would make clear: It’s not EPS that’s really in question here but the overall market.  A P/E of 22 on earnings in July will get us there.  Will the market be there to give us our P/E?  Perhaps not.  But surprising unit sales of iPhones and iPads (possibly worth more than the EPS contribution alone) could put us over the top without the full cooperation of Mr. Market.  Beating consensus earnings (and whisper) #s for Q3 could also do the trick.

    [ Edited: 26 May 2010 03:17 AM by ByeTMO ]      
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    Posted: 26 May 2010 11:11 AM #15

    adamthompson3232 - 26 May 2010 01:46 PM

    I realize Munster is one of the worst AAPL analysts out there but I think he is dead wrong on this. Yes, much of the surprise is gone. Of course there was NEVER going to be another domestic carrier announcement at WWDC. For the same reason that Gray Powell’s idiotic product loss hurt sales, an announcement of an upcoming carrier would also hurt sales. If a new carrier is announced (I doubt one will be for the aforementioned reason), it will only happen if Apple plans to begin selling on the new carrier IMMEDIATELY. Not in a month or two - immediately. That is unlikely.

    However, I do think there will be a surprise out of WWDC. I think the surprise is going to be that the new iPhone is available for immediate purchase. And by immediate I mean within one day of the announcement of the new phone during SJ’s keynote. That would be a positive surprise and one that would help juice the current quarter’s iPhone unit sales. I think Apple will be compelled to do this by Gray Powell’s idiocy.

    I disagree with your post.  You need to move on about blaming some Apple engineer and continuing to smear his reputation.  At worst the guy made a mistake and his employer will deal with him.  I hope you don’t treat your coworkers with such disdain.  As far as sales impact.  My non technical survey of Iphone owners over for a BBQ.  No one knew a new version of an Iphone was coming out and most thought it was pretty cool when they heard the feature set, so as long as we get the same press coverage as usual their will be little impact.  As far as release dates it’s anyones guess but I’m sure it depends on how manufacturing is going.  With Walmart selling the 16GB 3GS for $97, it looks like Apple will continue offering a 3GS version which will sell well against all the Android devices trying to offer a low cost alternative to iPhone .