FQ1 Analyst Consensus

  • Posted: 29 December 2010 04:28 PM

    Current analyst consensus for FQ1 is revenue of $24.12 billion and eps of $5.29 per share. This is underwhelming considering the revenue and eps growth rates of FY2010.

    The consensus suggests revenue growth of 53.8% and eps growth of 44%. There are obvious issues with these numbers. While a expect a narrowing of the differential between the revenue and eps growth rates in FQ1, I see no reason for eps growth to be significantly below the pace of revenue growth.

    I expect the FQ1 surprise to be quite dramatic, compelling several analysts to raise their FY2011 estimates and price targets.

         
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    Posted: 29 December 2010 05:52 PM #1

    A bit over half of the 18 analysts that I am tracking have target prices of under $ 400.  Four have prices over $ 430.

         
  • Posted: 29 December 2010 05:52 PM #2

    adamthompson3232 - 29 December 2010 08:48 PM

    I think “many” rather than “several” and “dramatically” raise would be more accurate:)

    Agreed.  grin

    I’m just trying to play nice.  :innocent:

         
  • Posted: 29 December 2010 06:02 PM #3

    I’ve put the analyst consensus revenue estimate of $24.12 through my historical revenue and eps ratio test and it suggests an eps outcome of about $5.55 per share. There’s a bit of a disconnect between the consensus revenue estimate and the consensus eps outcome. In other words, analysts are estimating a lower eps outcome from revenue than Apple has reported over the past four quarters.

         
  • Posted: 29 December 2010 11:38 PM #4

    DawnTreader - 29 December 2010 10:02 PM

    I’ve put the analyst consensus revenue estimate of $24.12 through my historical revenue and eps ratio test and it suggests an eps outcome of about $5.55 per share. There’s a bit of a disconnect between the consensus revenue estimate and the consensus eps outcome. In other words, analysts are estimating a lower eps outcome from revenue than Apple has reported over the past four quarters.

    I suspect that most of these ‘analysts’ start with an answer that makes them comfortable and than adjusts their number to make it fit.  A P/E ratio of 20 (forget about cash)  at the end of the last quarter w ould give them a stock price of about $315 per share.  This would give a 12 month trailing earnings of $16.77 and a stock price of $355.  This would be a comfortable number for where we are now, ca $325 near the end of the quarter.  Then they can juggle their numbers to support their position.

    Why are they so leery of Apple?  They don’t believe.  Apple does things differently.  What they do, how they run their business, differs from what most analysts think they should do.  Apple introduced three killer products in less than a decade: the iPod, the IPhone and the iPad.  All were met with derision at introduction, but they revolutionized or are in the process
    of revolutionizing entire industries.  Since most analysts don’t understand Apple, they don’t
    believe they can keep it up.  But notice that all, their competitors are trying to copy them as best they can!  They believe in the me too business strategy.  Beats thinking.

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  • Posted: 30 December 2010 01:53 AM #5

    adamthompson3232 - 30 December 2010 04:08 AM
    DawnTreader - 29 December 2010 10:02 PM

    I’ve put the analyst consensus revenue estimate of $24.12 through my historical revenue and eps ratio test and it suggests an eps outcome of about $5.55 per share. There’s a bit of a disconnect between the consensus revenue estimate and the consensus eps outcome. In other words, analysts are estimating a lower eps outcome from revenue than Apple has reported over the past four quarters.

    I think the primary issue, and what is holding Apple back momentarily, is that the analysts simply plugged in a lower GM% to their models and then saw what was spit out at the bottom of the spreadsheet. What they don’t realize, AND THIS IS ABSOLUTELY CRITICAL, is that the lower GM% is not the result of pricing pressure on Apple products. On the contrary, the iPhone ASP has not budged one bit yet. The lower GM% is because Apple is growing revenue by leaps and bounds with a new revolutionary product called the iPad that happens to, at least at the moment, have a lower GM% than the sum of Apple’s other businesses. This is not a net negative for Apple, and is in fact a HUGE net positive due to the massive incremental revenue the iPad is bringing to Apple.

    Here’s a question. What if the analysts are one year off in terms of when Apple’s growth begins to slow. They are all currently modeling for fiscal 2011 growth to slow down significantly from fiscal 2010. What if this slow down doesn’t occur until 2012 or beyond? The company’s revenue would hit levels this year that they are not forecasting for at least another year. This is BIG for Apple because this quarter is going to show exactly this trend. Estimates will HAVE to go up (unless your name is Giant Moron who left his last Q revenue estimate at $18B which matched Apple’s guidance).

    $400 could come much quicker than anyone thinks (except for some of us here). We are three weeks away from a very good time for AAPL longs.

    Estimates for FY2012 are even more peculiar. A moderating revenue growth pace in FY2012 might be somewhere in the area of 40% to 50% revenue growth due to the declining relative importance of the Apple iPod and the rising relative importance of the Apple iPad. For FY2012, an eps of $35 is a conservative estimate. In other words, growth won’t slow in FY2011 or FY2012 to anywhere near the pace suggested by the consensus estimates.

         
  • Posted: 31 December 2010 09:02 AM #6

    DawnTreader - 30 December 2010 05:53 AM

    Estimates for FY2012 are even more peculiar. A moderating revenue growth pace in FY2012 might be somewhere in the area of 40% to 50% revenue growth due to the declining relative importance of the Apple iPod and the rising relative importance of the Apple iPad. For FY2012, an eps of $35 is a conservative estimate. In other words, growth won’t slow in FY2011 or FY2012 to anywhere near the pace suggested by the consensus estimates.

    $35 EPS times AMZN’s P/E of 70 equals $2,450 per share.  We can dream…

         
  • Posted: 31 December 2010 07:27 PM #7

    DawnTreader - 29 December 2010 08:28 PM

    Current analyst consensus for FQ1 is revenue of $24.12 billion and eps of $5.29 per share. This is underwhelming considering the revenue and eps growth rates of FY2010.

    The consensus suggests revenue growth of 53.8% and eps growth of 44%. There are obvious issues with these numbers. While a expect a narrowing of the differential between the revenue and eps growth rates in FQ1, I see no reason for eps growth to be significantly below the pace of revenue growth.

    I expect the FQ1 surprise to be quite dramatic, compelling several analysts to raise their FY2011 estimates and price targets.

    YoY Revenue growth for fiscal Q3 was 61%, Q4 was 66%.  My YoY revenue estimate for Q1/11 is 72% ($26.98 Billion).

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  • Posted: 02 January 2011 02:37 PM #8

    adamthompson3232 - 31 December 2010 11:42 PM
    Gregg Thurman - 31 December 2010 11:27 PM

    YoY Revenue growth for fiscal Q3 was 61%, Q4 was 66%.  My YoY revenue estimate for Q1/11 is 72% ($26.98 Billion).

    If you are right, the only question is just how quickly we get to 400. I vote February.

    February would be nice, but I think mid April more likely.

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  • Posted: 02 January 2011 03:16 PM #9

    This is a reminder to visit the AFB AAPL FQ1 Estimate Index.

    I also posted my estimates this morning.

    Individually and as a group we are well above Street consensus.

         
  • Posted: 02 January 2011 04:30 PM #10

    adamthompson3232 - 02 January 2011 07:50 PM
    Gregg Thurman - 02 January 2011 06:37 PM

    February would be nice, but I think mid April more likely.

    April is fine by me. But if we hit $26.98B in revenue, $400 will come much more quickly than April, in my opinion. WS likes nothing more than ACCELERATING growth, especially when it is so unexpected (a P/E of 21 or so certainly shows it is not expected).

    AAPL has hit a wall of Wall Street incredulity and fear.  Since IBM got into the PC business Apple has been fighting the underdog image exasperated by gross mismanagement through 1997.  Apple’s comeback has been nothing short of extraordinary and WS is having major believability problems.  Couple that with the fact that Apple is a “mature” company growing like a startup.  The price of AAPL, if given a ISM (PE) of a rapidly growing startup would result in a stock value far in excess of $1,000.  Given Apple’s past, which WS can’t separate from current management, that valuation scares the hell out of them.

    I don’t think we will ever see a 30 multiplier again, because by the time WS accepts Apple’s growth story, Apple will truly become a mature company (with the slower growth reserved for mature companies).

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  • Posted: 02 January 2011 04:43 PM #11

    DawnTreader - 02 January 2011 07:16 PM

    I also posted my estimates this morning.

    Jeezus Dawn.  Our estimates are nearly identical.  Where I’m a little higher than you in one estimate, you’re a little higher than me in another, and vice versa.

    I feel very confident that Apple will report between $6.27 and $6.37 (and ecstatic if Apple reports even more) come the 18th.

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    Posted: 02 January 2011 05:38 PM #12

    Gregg Thurman - 02 January 2011 08:30 PM

    ... Given Apple’s past, which WS can’t separate from current management, that valuation scares the hell out of them.

    I don’t think we will ever see a 30 multiplier again, because by the time WS accepts Apple’s growth story, Apple will truly become a mature company (with the slower growth reserved for mature companies).

    Of similar view.  The flip side is good, stock price is less volatile, can sleep better.

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  • Posted: 02 January 2011 05:46 PM #13

    The flip side is good, stock price is less volatile

    But then we’ll be looking for the next 30 bagger…..........

         
  • Posted: 02 January 2011 06:04 PM #14

    I’ll be putting all of the analyst estimates (pros and independents) through my informal revenue v. eps test. For the December quarter I’m expected net income to come in around 22% of reported revenue.

    There’s a disconnect on Wall Street eps estimates relative to revenue. We will most likely see some major revisions of price targets and eps estimates for FY2011 fooling the December quarter results. There’s plenty of room for AAPL to run and analysts need to close their eps to revenue gaps.

         
  • Posted: 02 January 2011 06:30 PM #15

    Gregg Thurman - 02 January 2011 08:43 PM
    DawnTreader - 02 January 2011 07:16 PM

    I also posted my estimates this morning.

    Jeezus Dawn.  Our estimates are nearly identical.  Where I’m a little higher than you in one estimate, you’re a little higher than me in another, and vice versa.

    I feel very confident that Apple will report between $6.27 and $6.37 (and ecstatic if Apple reports even more) come the 18th.

    It is remarkable how close many of us are in our estimates considering the expected growth in revenue and a revenue performance 25% (or more) higher than anything Apple has ever reported before.