Apple Inc. (AAPL) To Report Solid Q1 Earnings On Monday

UBS analysts believe Apple will report good numbers for Q1, on the strength of the many factors including the China Mobile deal and the popularity of its tablets.

Apple Inc. (AAPL) To Report Solid Q1 Earnings On Monday

Apple earnings estimates

Apple Inc. (NASDAQ:AAPL) should have a solid F1Q report, perhaps beating UBS analysts’ above-consensus estimates of $58.6bn in revenue, a 37.1% gross margin, and $14.42 in EPS. They expect unit shipments of 55mn iPhones, 25mn iPads, and 4.5mn Macs. For the March quarter, analysts estimate revenue of $47.3bn, a gross margin of 37.7%, and EPS of $11.44. The carrier additions of DoCoMo and China Mobile could buffer seasonal weakness—Chinese buying intentions are up for Apple Inc. (NASDAQ:AAPL). Double-digit EPS growth is achievable this year on 8% revenue growth, a flat-to-up gross margin, and lower share count.

Model and storage mix could help AAPL margins

Consumer Intelligence Research Partners (CIRP) surveys 500 US Apple Inc. (NASDAQ:AAPL) buyers each quarter. CIRP data confirms the 5s is handily outstripping 5c demand at a 2.2-to-1 ratio. Two factors could aid the gross margin: (1) the mix shift to newer models with the iPhone 5c and 5s combined constituting 86% of iPhone purchases while the 4/4S decline, and (2) greater average phone memory, up 12% sequentially.

iPad Air popular; iPad growth could improve

The iPad Air dominated the iPad mix at a 42% share, significantly reducing the contribution of the iPad 2 and iPad with Retina Display. Moreover, the survey indicates a substantial jump in storage from a 25-28GB over the past year to 37GBs, also supporting ASP. iPad revenue rose just 3% last year due to ASP erosion. Analysts think revenue growth could improve this year despite slower unit growth of 13% on a more stable average selling price.

AAPL Valuation

UBS price target of $650 per share is based on a NTM EV/FCF multiple of 9.5x and a P/E of 14.6x, about the same as an index of large-cap tech stocks. Analysts at the research firm think Apple Inc.(NASDAQ:AAPL) deserves at least the same multiple based on its superior ROIC and positive earnings momentum. Institutional ownership could rise, and the current 15-20% P/E discount to the market might narrow. They believe new categories are required for a price breakout though.

Comments (2)

  • Chiam

    Wow I beat Michael Blair before he bashes Apple. He will tell you that no one showed up at the store in China on the first day.. (beijing). Well the NY Times reported only 12 customers in the store. So that is the end of Apple. Is that a joke? The NY Times is a joke that is for sure.

    Even if Apple beats, the Michael Blairs of the world will bash the stock until every investor is nervous and sells. That is the game. When it got to 387 people knew that it was ridiculously low and road it up to 575. That is what they would like to do again. The bears will turn bullish when the stock is 387. Why not. They tried for 270, 240 and 200. But having 150 billion in cash doesn’t matter. at $ 200 they could buy back half the company and have a p/e of 3.75 ex cash. But that didn’t stop Mary Beth McLean from prediciting 200.

    David Trainer just came out with another ROIC article predicting 270. Just in case something happens he will get to be on CNBC and hailed a hero. Why not. Smart move actually. But all this bashing takes a toll because it is always the argument that Apple is too big and this is their last hurrah.

    They are right that Apple is big and can’t grow as fast. But 2 things can happen. They grow slowly and make alot of cash. They do buybacks and their EPS goes up and they save having to pay that fat dividend. They can use that fat dividend savings to replenish their bank account, do more buybacks or increase the dividend. The latter is what I think they will do. cash will certainly help in the long run.

    Spending 25 billion on buybacks a year will certainly help over the long haul. Plus even if they grow slowly, they can will have more cash to spend each year. They are working on alot of big things and to discount that is silly.

    January 25, 2014 at 4:50 pm
    • Mike.R.

      It’s good that there are people like you out there, otherwise, no-one would keep up the share price and buy whatever analysts with some knowledge dump.

      your analysis has old info (curious how you pick the best numbers from different quarters), and how you focus on an asset (doesn’t matter if it’s cash, buildings or whatever: it’s just an asset!).
      Apple stock is worth about $230-280 objectively (by comparing the p/e ratio of its nearest competitor, Samsung).
      The fact that people buying AAPL stock based on so much emotion (mostly positive, as Apple’s image is cool) is why the stock is so high and why we are not allowed to touch it at our company (even if it were to drop to $100, there would still be too much emotion, positive or negative, involved with AAPL for objective investing).

      January 25, 2014 at 11:43 pm

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