Apple 2.0: The Quarterly Estimate Comparisons Begin!

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    Posted: 08 January 2012 04:30 AM #31

    DawnTreader - 08 January 2012 08:25 AM
    Mav - 08 January 2012 08:15 AM

    If you don’t mind me saying so, Robert (given how we used to try to avoid speaking in too many specifics prior to earnings), I think that in more sane times, AAPL could easily support a share price of around $700 by November.  That was my target price once upon a time.  Unfortunately, AAPL has never been analyzed fairly, as it should be.  So we’ll have to make do with less.  Which, in any event, is still more than enough.

    A multiple expansion would need to be delivered by the market and would be based primarily on overall market conditions.

    Yup.  Which is why my “realistic” target price for AAPL by the end of fiscal ‘12, for purposes of my trading plan, is significantly lower than your target price of $640.  But my “laugh zone” theory, which is admittedly very new (~3 months) and undergoing extensive testing, tells me that based on my EPS assumptions, we will NOT see AAPL trade at valuation levels of stocks such as WMT (12.5 multiple)...at least not for any extended period of time.  This gives me great confidence in AAPL “floor” prices quarter by quarter, even if a little more multiple compression continues to occur.

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  • Posted: 08 January 2012 06:33 AM #32

    Thanks for the hard work, Robert.  I’m impressed and hope you are correct.  It will be interesting to see if and how quickly the publication of your numbers moves the “professionals” numbers.  I expect after last Quarter’s debacle, it won’t be as much as we would normally expect.  The pros do not want to miss high for the second straight quarter.  It would label them as “Apple Fanboys” and they can’t afford that.

    I will be very surprised to see their number exceed $10.50.  This sets us up for a potentially huge beat on January 24.  I can just picture Maria scrambling to make up a reason why this could never happen again.  What’s of most interest to me is where will all of this lead the share price.  The Pre-earnings price run up has begun at least a week too early, based on history.  If volume starts to increase next week we may be in some kind of break out mode.  If earnings are where you, Horace and Katz suggest and if guidance is at all positive, we could see an unprecedented break out. 

    After the post earnings excitement dies down we will see the iPad 3 and the annual meeting.  If a dividend and/or a stock split is announced either at earnings or in the annual meeting we could hit some crazy number by the middle of March.  Pretty exciting few weeks ahead of us.

         
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    Posted: 08 January 2012 01:29 PM #33

    Robert, did you consider the iPod line’s lack of “true” refresh (even the iPod touch!) in your estimates?

    Margins for all iPods must be higher than ever.  Particularly the iPod touches, given no A5 chip or camera upgrade that anyone knows of.  Also, the nano didn’t get more than a firmware update from what I can tell.

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  • Posted: 08 January 2012 01:42 PM #34

    Mav - 08 January 2012 05:29 PM

    Robert, did you consider the iPod line’s lack of “true” refresh (even the iPod touch!) in your estimates?

    Margins for all iPods must be higher than ever.  Particularly the iPod touches, given no A5 chip or camera upgrade that anyone knows of.  Also, the nano didn’t get more than a firmware update from what I can tell.

    Mav:

    I factored that into my unit sales estimates. More importantly, the iPad was emphasized at the retail stores during the holiday season rather than the iPod which in years past had been a big driver for store foot traffic. I lowered my average estimated revenue per unit a bit as well to account for the expected fall off in iPod touch sales.

    In the September quarter Apple moved away from the free iPod touch promotion for the back-to-school season. That accounted for a chunk of the fall off in unit sales in that quarter. In the grand scheme of things the iPod’s performance isn’t as big of a factor as in the past and this will be the last quarter in which changes in iPod unit sales will have any real impact on the results.

    Apple eliminated the iPod classic which will also have a slight impact on the line’s unit sales performance. I cut my unit sales estimate following observations at the retail stores.

         
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    Posted: 08 January 2012 02:01 PM #35

    Great analysis, Robert. 

    Always so educational to follow your logic.

    I’m about a million iPhones behind you ( and I felt very aggressive moving up to 34.2) but I sure cannot dispute your logic in how you arrived at the higher figure.

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    Posted: 08 January 2012 02:44 PM #36

    DT:  Agreed on the large YOY decline in iPod unit sales (as far as the trend goes), but don’t you think lower iPods, and higher-margin ones at that, combined with their reduced contribution to revenues, equals a measurable bump in GM and net profit margin by extension?

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  • Posted: 08 January 2012 03:05 PM #37

    Mav - 08 January 2012 06:44 PM

    DT:  Agreed on the large YOY decline in iPod unit sales (as far as the trend goes), but don’t you think lower iPods, and higher-margin ones at that, combined with their reduced contribution to revenues, equals a measurable bump in GM and net profit margin by extension?

    The question was directed to DT, but I’d like to respond. Larger margins of a shrinking pie won’t lift remaining boats, or something like that.

    The value of the iPod was decided in June 2007, when Apple made it a software feature in another product. Since then the value of iPod has been as a gateway/introduction to Apple products, but the success of the iPhone has marginalized even that value.

    IPod’s next most important value to Apple is the consumption of iTunes consumables, and that too is being marginalized by the higher unit sales of both the iPhone and iPad.

    Apple sees it the same way, as evidenced by the fact that they aren’t putting R&D monies into it. To the extent that Apple has reduced R&D expense from future iPod sales will improve iPod margins, but those R&D resources will just be put elsewhere. The net effect will be zero savings Company wide.

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    Posted: 08 January 2012 03:39 PM #38

    Ensign,

    I won’t speak for Robert, obviously, but here’s one way to look at things:  The “catch-up” factor.

    Apple lagged the smartphone rate of growth last quarter.  No way around that.  The competition took a lead by taking advantage of Apple’s transition and sales pause.

    A fierce competitor ALWAYS wants to make up lost ground.  The question is, how well does that mesh with Apple’s very deliberate historical production ramp-up, or with Apple’s evolution of its ramp-up strategy?

    If Apple goes for 35.75M iPhones, Apple will achieve blended smartphone rate of growth of about 74% over 2 quarters.  When you look at it _that_ way, and making the not-at-all-big leap of faith that Apple can easily sell 35M+ iPhones for fiscal Q1 if only it made that many to satisfy demand, the 35.75M target is very reasonable.  (I personally have it at about 65% blended rate of growth, which is very conservative.)

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    Posted: 08 January 2012 03:42 PM #39

    Gregg:  I actually left out R&D altogether - it’s very immaterial IMHO given Apple’s extreme R&D discipline and efficiency.  I’m just talking straight-up margin for iPod based on cost and cost curve as a small but important factor in considering overall GM.  I’m not disputing the iPod’s increasing “irrelevance.”

    Again:  iPhone as % of revs will go sky-high to around 50%.  GM will spike unless you believe iPhone 4S has significantly higher cost than iPhone 4 so that GM of iPhones on a blended basis is substantially lowered, despite extreme iPhone cost leverage.

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    Posted: 08 January 2012 03:52 PM #40

    Digging up an undiscussed topic and searching through the archives for a new one:

    1)  Given that this is a 14-week quarter, how much additional skepticism will be built into interpreting the results?  E.g., “well of course Apple did very well, they had a 1-week, 7-10% advantage to pump up their results.”  (Related: effect on fiscal Q2 2012 guidance/sequential impact)

    2)  Going back in time, Oppenheimer, who was about as sandbaggin’ as he is now AFAIK, guided to $4.7B revs for the last 14-week quarter Apple’s had (fiscal Q1 2006).  Actual revs?  $5.75B, 22% over guidance.  Is there potential for additional upside surprise to be inferred from this one footnote in Apple history, 6 years ago?

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  • Posted: 08 January 2012 08:57 PM #41

    Mav - 08 January 2012 07:39 PM

    Ensign,

    I won’t speak for Robert, obviously, but here’s one way to look at things:  The “catch-up” factor.

    Apple lagged the smartphone rate of growth last quarter.  No way around that.  The competition took a lead by taking advantage of Apple’s transition and sales pause.

    A fierce competitor ALWAYS wants to make up lost ground.  The question is, how well does that mesh with Apple’s very deliberate historical production ramp-up, or with Apple’s evolution of its ramp-up strategy?

    If Apple goes for 35.75M iPhones, Apple will achieve blended smartphone rate of growth of about 74% over 2 quarters.  When you look at it _that_ way, and making the not-at-all-big leap of faith that Apple can easily sell 35M+ iPhones for fiscal Q1 if only it made that many to satisfy demand, the 35.75M target is very reasonable.  (I personally have it at about 65% blended rate of growth, which is very conservative.)

    Mav, we have precedent for sales after a miss.  Check out iPads sold during the December and March quarter vs June quarter of F2011.  Now look at March quarter guidance vs December quarter guidance, and the corresponding actuals.  March quarter actuals should have been higher than December quarter actuals, based on guidance.  That isn’t what happened.  I think the culprit was iPads, and look what happened to them in the June quarter

    It has been my contention for some time that Apple missed its March quarter internal numbers, and that led directly to June quarter’s blow out results (December results $6.43, March quarter results $6.40, June quarter results $7.79)

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    Posted: 08 January 2012 10:50 PM #42

    Gregg, you know my thoughts on “internal guidance.”  We will continue to agree to disagree somewhat on that.  I go with what I see, and I don’t see Apple the company weakening or beginning to weaken in the slightest.

    Also, I’m sorry but I’ll need more specifics from you about guidance v. actual before responding about what should have been higher.  For now, I align with Zaky’s (free, not-a-subscriber, and-wow-$1799-a-year-isn’t-cheap-but-more-power-to-him) position that when you start checking your numbers, your first and best validation metric is revenue guidance, given the much higher levels of consistency as opposed to EPS.

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    Posted: 09 January 2012 12:53 AM #43

    iPhone sales estimate Apple 2.0

    Of the “blogger group”, the low goes from 30.17 M ro 35.75.  Median 33 M.  If we throw out the high and low (one statistical “method”), the median raises to around 33.5 M.  Repeating this one more time, again 33.5 roughly.

    Leaving aside Q4, the blogger group is in the ballpark.  Nearly all of those (myself the exception) rank in the top 10 estimates at least twice in FY Q1, 2 or 3.

    Not one of the pros can claim to be in the top 10 ballpark 2 times among any of the 4 fiscal quarters.  NOT ONE.

         
  • Posted: 09 January 2012 01:36 AM #44

    Mav - 09 January 2012 02:50 AM

    Gregg, you know my thoughts on “internal guidance.”  We will continue to agree to disagree somewhat on that.

    LOL

    Mav, let me ask you a couple of questions.

    Do you think Apple manages its inventory well?
    How do they do that, if they don’t know how many they can produce, and how many they can sell?

    How can it be that Apple’s revenue guidance, to actual performance, is so consistently predictable?

    Think about your answers a bit, then tell me again that Apple doesn’t know how much they will make in a quarter.

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    Posted: 09 January 2012 02:20 PM #45

    Deagol’s final estimate is out.

    http://aaplmodel.blogspot.com/2012/01/fiscal-1q-2012-final-estimates.html

    Impressive projections for 2016.