Analyst: Apple’s Q3 Guidance too Conservative

| Apple Stock Watch

Apple landed yet another record breaking quarter with its second quarter earnings report with revenue at US$13.5 billion and a quarterly profit of $3.07 billion. The Mac and iPhone maker projected it will show between $13 and $13.4 billion in its third fiscal quarter, and UBS analyst Maynard Um thinks the company is offering conservative guidance yet again.

Apple projected a third quarter gross margin of 36 percent, down from the second quarter’s 41.7 percent, and EPS between $2.28 and $2.39. The lower margin expectations stem from iPad mix, a stronger US dollar, the recent MacBook refresh, the education season, and a future product transition — most likely an iPhone upgrade.

“Based on our margin build up, [Apple’s] guidance appears too conservative as it, in our opinion, implies material margin degradation (500bps) in Macs & iPhones,” Mr. Um said. “We believe guidance sets up for another material beat/raise and expect continued momentum from a September iPhone ramp, Back-to-School, and then holidays.”

Looking forward, Mr. Um is raising his fiscal 2010 revenue estimate from $54 billion to $57.5 billion, and is raising his EPS from $12.04 to $13.22. For fiscal 2011, he is bumping his revenue estimate from $59.8 billion to $61.7 billion, and shifting his EPS estimate from $13.45 up to $14.36.

Mr. Um is maintaining his “Buy” rating and raising his target price for Apple’s stock from $280 up to $315. Apple is currently trading in the pre-market at $259.61, up 15.02 (6.14%).



UBS analyst Maynard Um thinks the company is offering conservative guidance

And for his next trick he’ll predict that it will rain on Seattle this year.

I’m rather amused that he felt the need to restate the bloody obvious. Apple ALWAYS offers conservative guidance.


I suppose he does it to hedge his forecasts, but I think there’s something to read between the lines in Cook’s statement. Does anyone else suspect Apple may be considering dropping the price of the iPad around the time of Back to School promotions, either directly or via a bundling offer?

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