Apple 2.0: The Quarterly Estimate Comparisons Begin!

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    Posted: 10 January 2012 01:12 AM #46

    It’s kinda interesting.  deagol and I always seem to be on the same wavelength for some of the important categories.  Considering deagol’s ability, that’s excellent company to be in for even a couple of metrics.

    But that question arises yet again:  deagol’s OpEx ratio is really, really low (7.9% if I’m calculating right).  Tax is a bit lower than guidance.  And yet, it almost seems like a little conservatism is thrown in with the 42.0% GM (I’m at 42.5%), leading to a net profit margin of 26.1%, which is about the same as my own, very conservative estimate.  Now, deagol and I are both playing it safer, granted, but I’m playing it even more conservatively, and yet most every independent analyst is right around my net profit margin of 26%.  Even when revs are over $2B north of my estimate.  I’ll say it again, record iPhone revenue mix and 50% higher revenue than fiscal Q3 (a 25.5% net profit margin quarter) should yield enormous profitability gains all by themselves.  So why are the independents still holding back a bit?

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    Posted: 10 January 2012 02:07 AM #47

    Mav - 10 January 2012 05:12 AM

    It’s kinda interesting.  deagol and I always seem to be on the same wavelength for some of the important categories.  Considering deagol’s ability, that’s excellent company to be in for even a couple of metrics.

    But that question arises yet again:  deagol’s OpEx ratio is really, really low (7.9% if I’m calculating right).  Tax is a bit lower than guidance.  And yet, it almost seems like a little conservatism is thrown in with the 42.0% GM (I’m at 42.5%), leading to a net profit margin of 26.1%, which is about the same as my own, very conservative estimate.  Now, deagol and I are both playing it safer, granted, but I’m playing it even more conservatively, and yet most every independent analyst is right around my net profit margin of 26%.  Even when revs are over $2B north of my estimate.  I’ll say it again, record iPhone revenue mix and 50% higher revenue than fiscal Q3 (a 25.5% net profit margin quarter) should yield enormous profitability gains all by themselves.  So why are the independents still holding back a bit?

    Maybe a hangover from last quarters big miss with predictions.

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    Posted: 10 January 2012 02:13 AM #48

    Maybe.  I’m not challenging anyone “per se”, I’m being very conservative this quarter myself, but it’s an interesting phenomenon.  Maybe I’ll whip up some revised numbers in the next few days (turning down the conservatism) and see which one of my projections was closer to the mark.

    So Burgess, where are you at for fiscal Q1 2012?  Haven’t seen your estimates yet.

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    Posted: 10 January 2012 03:57 AM #49

    Can you quantify it fairly readily?

    And can iPhone’s giant iPhone rev mix and Apple’s overall revenue leverage (we’re talking around 50% higher than Apple’s previous best quarter here) really not keep up?

    No one seem to explain Fx much in their estimates.  Honestly, its effects on Apple’s profitability haven’t been discussed in any great detail that I can remember, even from Apple management (unless it’s buried in the SEC filings somewhere).  I’d like to hear some perspectives.

    [ Edited: 10 January 2012 04:01 AM by Mav ]

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    Posted: 10 January 2012 05:04 PM #50

    Mav - 10 January 2012 07:57 AM

    Can you quantify it fairly readily?

    And can iPhone’s giant iPhone rev mix and Apple’s overall revenue leverage (we’re talking around 50% higher than Apple’s previous best quarter here) really not keep up?

    No one seem to explain Fx much in their estimates.  Honestly, its effects on Apple’s profitability haven’t been discussed in any great detail that I can remember, even from Apple management (unless it’s buried in the SEC filings somewhere).  I’d like to hear some perspectives.

    You’re right that this isn’t discussed in much detail. Here’s a relevant portion from the last conference call:

    Katy Huberty - Morgan Stanley, Research Division
    Peter, this quarter you were able to print north of a 40% gross margin despite the mix shift away from your high-margin product and towards lower margin products. So just curious why you don’t think you can do better than 40% in December given how well the iPhone 4S is already doing and the favorable component cost environment, and then I have a follow-up for Tim.

    Peter Oppenheimer
    Sure. I understand your question, Katy. We expect the gross margin to be relatively flat on a sequential basis. And we expect this because as you pointed out, we do think a favorable component cost environment will continue, and we certainly expect a very strong mix of iPhones, both of which are positive for gross margins. However, we expect both of these to be basically fully offset by the impact of higher cost structures and reduced price points for the recently introduced iPhones and iPods as well as the stronger U.S. dollar. It’s really strengthened in the last couple of weeks from where we were across the summer. So that’s why.

    For simplicity, assume a mix of currencies more tied to COGS (yuan, won, yen, etc.) are up 2% against the dollar q/q, and a mix of currencies more tied to revenue (euro, pound) are down 6% against the dollar q/q. Assume 75% of COGS and 25% of revenues are tied to the former, while 25% of revenues are tied to the latter.

    $ASP = $Revenue/Units = (.25*.94+.25*1.02+.5)*LocalRevenue/Units
    = (.235+.255+.5)*LocalASP = .99*LocalASP = 1% lower ASP

    $GM% = 1-$COGS/$Revenue = 1-(.75*1.02+.25)*LocalCOGS/(.99*LocalRevenue)
    = 1-1.0253*LocalGM% = 2.5% lower or about 100 bps impact.

    Of course these are made up (but sensible) rough figures for the assumptions. Try plugging in your own assumptions.

         
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    Posted: 10 January 2012 08:57 PM #51

    Superb!  Thanks, deagol.

    While I puzzle this out, *checks Wolfram Alpha*

    (USD/Euro chart for the past year) - On the whole, the USD strengthened against the Euro.

    But that’s not at all what happened relative to the yuan (and Greater China is an increasingly huge market for Apple).

    USD net strengthened against the won in calendar Q4, but Apple’s big on prepayment contracts for NAND flash and componentry, so it’s difficult to say what impact that had.

    If you kinda blend it all together, a few quick Wolfram searches show the USD getting stronger against the Euro and some other foreign currencies, but continued USD weakness against the yuan, where Apple both buys and sells in large quantities.  What does it all mean?

    [ Edited: 11 January 2012 01:02 AM by Mav ]

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
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