Reading Apple: iPhone Sales Slightly Off, MacBook OK

Piper Jaffray's Gene Munster unveiled his latest read on Apple demand Monday and reckons that the company will see iPhone December quarter sales to fall about 5 percent to 15 percent from the September quarter. Meanwhile, demand is “healthy” for the latest MacBooks.

How Apple fares during this economic downturn has become a little bit of a parlor game. And this guessing game continues even as vendors such as Intel are saying business stinks.

Munster and his team frequently spends time in Apple stores trying to get a read on demand.

Here’s what he found after 25 hours in Apple’s stores.

Munster writes:

We believe iPhone units will decline 5-15% sequentially. We currently model an 8% decline. This is above recent reports from Asian suppliers suggesting up to a 40% sequential decline.

Munster figures that iPhone sales will be cushioned in the December quarter due to international subscribers. Meanwhile, the iPhone will be a holiday gift in some cases. Munster is predicting that Apple will sell 6.4 million in the December quarter with the help of Best Buy.

The upshot: Less than iPhone Armageddon here. Anything less than terrible is actually pretty good.

On Mac demand, Munster writes:

Demand for the new MacBooks appear to be healthy. We believe there will be slight upside to our 2.6m Mac units in December. Our estimates are at the high end of company guidance.

The upshot: If Apple hits its outlook, which was viewed as lowball guidance, it would be seen as a victory now. Munster’s take may be accurate, but it remains to be seen if he’s right. Why the skepticism? New MacBooks just landed–we need to see what happens after that first wave of the Mac faithful is done buying.

Comments

[Andy Zaky:]

Nice rundown of Munster's estimates. Notice, that even Munster's estimates are conservative. His estimates get moderately beat every single quarter, and I'm personally expecting some pretty big upside on the quarter. Here are my estimates published at bullishcross.com:

Unit Sales:
2.8 Million Macs
8 Million iPhones
22 Million iPods

Earnings Estimates:
$11.29 Billion in Revenue
$1.96 in EPS

This is probably the most realistic outlook investors are going to receive from any analyst. I'm brutally honest at a time where some want me to keep my mouth shut. ;)

I simply cannot do that.

2008 Nov 17 11:46 AM

[20smoney:]

Andy:

I love your analysis, but your unit sales estimates look pretty high, maybe too high. Thankfully, even if we don't hit those unit sales, we're looking at fantastic earnings for quarters to come.

I'm very long apple.


On Nov 17 11:46 AM Andy Zaky wrote:

> Nice rundown of Munster's estimates. Notice, that even Munster's
> estimates are conservative. His estimates get moderately beat every
> single quarter, and I'm personally expecting some pretty big upside
> on the quarter. Here are my estimates published at bullishcross.com:
>
>
> Unit Sales:
> 2.8 Million Macs
> 8 Million iPhones
> 22 Million iPods
>
> Earnings Estimates:
> $11.29 Billion in Revenue
> $1.96 in EPS
>
> This is probably the most realistic outlook investors are going to
> receive from any analyst. I'm brutally honest at a time where some
> want me to keep my mouth shut. ;)
>
> I simply cannot do that.

2008 Nov 17 11:56 AM

[Hayweed:]

I purchased a new iphone on Thursday night to replace my 2g iphone which I handed down to my daughter. Out of the 10 people that were in the store while I was there for about 30 minutes, the couple in front of me bought an iphone, I bought an iphone and everyone else looked at the iphone. No one looked at the bold. 3 guys were told to go to the Apple store (not sure why). My checks at my apple store is that people are buying the Iphone. As for my personal checks, at the Richmond Marathon this week at least 4 of my personal friends are considering one and of my wife's group most of them want it.

I think sales will be good this quarter and even better thanks to Verizon advertising the storm. If the phone is not as good as the iphone, than many verizon customers who are on the fence may finally switch to AT&T and the iphone.

2008 Nov 17 12:03 PM

[michiganjake:]

I'm with you all the way Andy. Our store in Grand Rapids, Michigan has been hopping every day. The teenagers can't get enough product. If they want to be part of the in crowd they must have iPods, iPhones and notebooks! Their parents are into the Macs pretty heavily as they are migrating away from the ad ware/spy ware troubles with the PC's. Saving money in the long run by buying a Mac, because they need not buy antivirus products!

2008 Nov 17 12:04 PM

[michiganjake:]

I'm with you all the way Andy. Our store in Grand Rapids, Michigan has been hopping every day. The teenagers can't get enough product. If they want to be part of the in crowd they must have iPods, iPhones and notebooks! Their parents are into the Macs pretty heavily as they are migrating away from the ad ware/spy ware troubles with the PC's. Saving money in the long run by buying a Mac, because they need not buy antivirus products!

2008 Nov 17 12:04 PM

[Timeline St...:]

Hi Andy and all,

I was really curious about the GAAP vs. non-GAAP accounting for iPhone after reading a lot of Andy's exasperated articles about the iPhone deferred revenue bomb and why analysts don't get it. I started putting the numbers into a spreadsheet and am really impressed at the multiplicative power of subscription accounting. That's why Apple will continue to knock the cover off the earnings ball even with modest sales increases.

However - I think that sales increases will not be modest. In Apple's Q1'09, iPhone will benefit greatly from the fast ramp into international distribution. iPod is far from saturated and has price points for everyone. Mac sales, particularly notebooks, continue upward. Go to any Apple Store for the proof. That's why Andy's numbers may turn out to be correct.

Finally AAPL investors, there is a moderated Google board for conversations focused on AAPL news (good and bad) that affects investors. If you are able stay on topic and treat people nicely please check it out.

2008 Nov 17 12:13 PM

[Timeline St...:]

FYI - The board is "AAPL Finance No SPAM" and if you send an e-mail to the moderator he will invite you.

2008 Nov 17 12:16 PM

[kris23:]

Despite falling iPhone sales, I think Apple will be fine with sales of the new Macboks. Sentiment for Apple was extremely bullish (www.predictwallstreet....) last week before dropping to become more bearish now, but I think its only a temporary dip before the holidays and people start spending more again.

2008 Nov 17 12:37 PM

[ApplefanMiami:]

I strongly believe that Apple's 1st Quarter will ultimately be a blowout quarter as is typical for Apple even during these uncertain economic times...as most here have eluded, the new line up of MacBook's is going to be strong, as I too have been to many different Apple stores to see very heavy traffic in stores in the South Florida area and many buying the new MacBook's and iPhones that will bring about the increase in overall revenues and profits including increased iPod sales because that market in other countries are strong based on my own research, thus Apple will deliver for Q1 and into 2009!!!!

My recommendation as not only an Apple fan but also as a Financial Planner/Advisor is that many investors want in Apple at the current stock price...they feel now is the time to get in at under $90 as it will probably head much higher in the coming weeks, especially after the Thanksgiving weekend shopping phenomenon!!!

BUY BUY BUY and reap the profits in January and into 2009!!!

2008 Nov 17 02:54 PM

[mrchuck1231112:]

hi Andy,
I've followed your analysis for a few quarters, your estimates are definitely more in line with that of "pro" analysts, however, one thing I think you might be missing is the size of PC market this quarter, it's projected to decline about 1-2% vs increase of 12% in previous quarters. Traditionally, apple has grown about 3-4times of PC market, this kind of growth rate along with overall PC market expansion allow apple to enjoy 30-40% unit growth, however, with a clear slow down in PC market overall growth, to maintain even 10% growth for apple, it means apple has to grow 10x of overall PC market expansion rate, which seems very difficult in a slowing economy.

2008 Nov 18 01:58 AM

[dr.anthony:]

Andy: Got a quick question for you. Your analysis has been and is the most complete, scholarly and trenchant. Do you intend or plan to extrapolate from your fundamental analysis a price target? I don't blame you if you avoid doing that, in as much that there appears to be a total disconnect between fundamental analysis and stock price.

Love your work, keep it up

dr.a


On Nov 17 11:46 AM Andy Zaky wrote:

> Nice rundown of Munster's estimates. Notice, that even Munster's
> estimates are conservative. His estimates get moderately beat every
> single quarter, and I'm personally expecting some pretty big upside
> on the quarter. Here are my estimates published at bullishcross.com:
>
>
> Unit Sales:
> 2.8 Million Macs
> 8 Million iPhones
> 22 Million iPods
>
> Earnings Estimates:
> $11.29 Billion in Revenue
> $1.96 in EPS
>
> This is probably the most realistic outlook investors are going to
> receive from any analyst. I'm brutally honest at a time where some
> want me to keep my mouth shut. ;)
>
> I simply cannot do that.

2008 Nov 18 02:12 AM

[mollytjm:]

i think there's still pent up demand and people waiting for an excuse to let that loose. as they come off contracts in early december, i think you'll find a lot of those people buying an iphone, either for themselves or, a better excuse, for their kids or other loved one. so i don't think we'll really know about this until maybe February... with the 2 year revenue on each iphone for Apple, they'll have a pretty good cushion for the continuing horrible economic year to come.
in the meantime, everywhere i use my iPhone, people ask to see it and friends, who start hesitant, don't want to give it back when i let them play a game on it and they end up saying..'i want one'!.
i'm also long APPL.

2008 Nov 18 09:50 AM

[Caltorguy:]

AAPL is a play on the broader economy. Sure a lot of people want an iPhone but will they sign an (expensive) multi-year talk and data plan right now that the iPhone requires when they aren't sure about their job / home etc? Apple's has positioned itself a premium product in the categories it operates in and is able to command prices acccordingly but this could work against it if this recession is long and severe - I mean how many people NEED a high-end smart phone or brand new $1500 laptop? "Need" trumps "want" pretty quickly if you don't know where your next paycheque is coming from, or whether you'll have you house in 3 months (or a FICO score above 400...). This is why the whole consumer tech mkt is dead right now and may continue to be for a long time - and if AAPL goes to $50, even doubling it will only take it back to half what it was 6 months ago. Maybe, if they really have all this cash, they should pay a dividend....

2008 Nov 18 03:48 PM