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Do you think it is possible to see the following two Apple (NASDAQ:AAPL) headlines even though the revenue figure is the same?

  1. "Apple's revenue slows to 14.8% YOY growth" and
  2. "Apple achieved an impressive 23.7% YOY growth as it refreshed nearly every product in Q1."

This article will break down why this will be possible for upcoming Q1 year-over-year (YOY) comparisons.

An important measure of earnings is YOY growth. You will need to quickly ascertain whether the professional analysts rigorously broke down the revenue and earnings when the Cupertino, CA corporation reports after the bell on January 23rd.

Here is why: Remember the year-ago quarter (Q1 FY12) included a non-recurring 14 week quarter as opposed to this fiscal year's December quarter. CFO Peter Oppenheimer made sure to mention this fact more than once in the conference call last October when providing guidance for the upcoming quarter's revenue and earnings. Let us take a look at what to expect Wednesday, 23 January at approximately 4:30 P.M.

Assumptions

We will first look at what I expect for unit sales and, based on a very conservative ASP (Average Selling Price), what I expect the revenue to be. You will note two things. First, I am anticipating the iPad mini to drastically reduce the ASP from the current figure which is approximately $500. Second, I am intentionally not increasing the Mac ASP to include the Retina displays or the new iMac lineup.

Especially in light of the news that AT&T (NYSE:T) said they sold over 10 million smartphones in the holiday quarter (of which 8 million may be iPhones), my analysis steered me towards a 50 million iPhone unit sales figure. If you do not agree, substitute your own numbers. Lastly, I am simply lumping peripherals, software and iTunes into one figure with no further breakdown. You should note Oppenheimer guided to $52B in revenue and the average analyst target for this quarter according to Yahoo! Finance is $54.58B. I will provide two other charts that include different assumptions if you think these are too far off.

Conservative ASP

Revenue With Conservative ASP
Units in MillionsAverage Selling PriceRevenue in Billions
iPhone50$600$30B
iPad25$450$11.25B
Mac5$1100$5.5B
iPod4.5$153$0.7B
Peripherals/iTunes/Software----$3B
Total Revenue $50.45B

You will notice in the first "conservative" chart a significantly lower ASP as I expect more iPad mini sales than other street estimates. The historic ASP for the 10" iPad is $500. Apple announced they sold 3 million iPad minis in the first 3 days during their October 2012 launch. Those were the Wi-Fi only models that retailed for $329 in the U.S. The Wi-Fi plus cellular models start at $459. Compare those figures to the $499 and $629 retail prices for 10" iPad with Retina in Wi-Fi and Wi-Fi plus Cellular respectively. I also conservatively priced in a lower ASP for the iPhone assuming more previous-generation phones were sold.

Actual ASP

Revenue With Historic ASP
Units in MillionsAverage Selling PriceRevenue in Billions
iPhone50$622$31.1B
iPad25$500$12.5B
Mac5$1180$5.9B
iPod4.5$156$0.7B
Peripherals/iTunes/Software----$3B
Total Revenue $53.2B

Comparing Q1 FY12 to Q1 FY13

Here's where the headlines will get interesting. Q1 2012 revenue for Apple was $46.33B. If you compare revenue growth using my $53.2B figure, the increase of $6.87B is a 14.8% YOY growth. But wait a minute...Let's figure out how much sales growth was attained if we make an apples to apples (no pun intended) 13 week versus 13 week comparison. $46.33B revenue for 14 weeks works out to $3.309B per week. In a 13 week quarter, that would have totaled $43.02B. That math works out to an increase of $10.18B or 23.7% YOY growth. An impressive difference depending on how you interpret the figures. Imagine the difference on Thursday morning after earnings when the pundits write "Apple's growth slows to just 14.8% YOY growth" as opposed to the accurate comparison of "Apple achieved an impressive 23.7% YOY growth after they refreshed nearly every product in Q1."

What if they blow away unit sales figures?

If Apple achieves what I think they will for sales figures, things could get even more plump. CEO Tim Cook has been criticized as an operations man as opposed to an inventor. Well, let's assume the gentleman is just a lowly operations man. He may be able to produce amazing figures with the first iPhone rollout fully under his purview.

Apple just announced it passed 40 billion apps downloaded. October through December saw 5 billion alone in those three months. I predict iTunes will report $3B not including any peripherals. Due to the overwhelming percentage of iPad minis I expect this quarter, I lowered the ASP for the iPad.

Revenue With Optimistic Unit Sales Figures
Units in MillionsAverage Selling PriceRevenue in Billions
iPhone55622$34.21B
iPad26470$12.22B
Mac5.21180$6.14B
iPod4.5156$0.7B
Peripherals/iTunes/Software----$4.5B
Total Revenue $57.77B

Now compare the growth from 2012 to 2013. A Q1 FY13's $57.77B would result in an increase of $14.75B over a 13 week comparable $43.02B FY12. That is a YOY increase of 34.3%. Even if you use the full 14 week sales figures of Q1 FY12 ($46.33B), that would be an increase of $11.44B or 24.6% YOY growth.

For the bulls--Here is your math:

Revenue With RidiculousUnit Sales Figures
Units in MillionsAverage Selling PriceRevenue in Billions
iPhone60622$37.32B
iPad27.5470$12.93B
Mac5.51180$6.49B
iPod4.5156$0.7B
Peripherals/iTunes/Software----$5B
Total Revenue $62.44B

A Q1 FY13's $62.44B would result in an increase of $19.42B over a 13 week comparable $43.02B FY12. That is a YOY increase of 45.1%. If you use the full 14 week sales figures of Q1 FY12 ($46.33B), that would be an increase of $16.11B or 34.7% YOY growth.

The bottom line: Do your own math when you see the headlines to ensure accurate YOY comparisons are made.

My next article will examine the earnings based on differing gross margin expectations for the holiday quarter.

Source: Accurate Year-Over-Year Comparisons Critical To Understanding Apple's Q1 FY13 Earnings Release