Bernstein Expects Mixed Bag for Apple

Bernstein Research analyst Toni Sacconaghi on Monday cut his profit estimates for Apple (AAPL) for the September 2009 fiscal year - but he also asserted that December quarter profits should once again top the company’s guidance.

Sacconaghi, who maintains his Outperform rating and $135 price target on the stock, writes in a research note that he expects Apple to deliver below-consensus revenue for the December quarter, but with above-consensus earnings on stronger-than-forecast gross margins. He sees revenue for the quarter of $9.3 billion, below the consensus at $9.76 billion, but with EPS of $1.47, above the Street at $1.38.

Apple had forecast profits of $1.06 to $1.35 a share; Sacconaghi notes that the company has beaten its own guidance for 14 quarters in a row. He expects gross margin the quarter of 33.5%, 3 percentage points above the company’s guidance of 30.5%. (Sacconaghi notes that Apple beat its own gross margin guidance by a similar amount in 6 of the last 8 quarters. Sacconaghi writes that the company will benefit from sharply lower prices in the quarter for both DRAM and NAND memory chips.

Sacconaghi adds that he expects the company to post revenue on a non-GAAP basis - reversing the impact of its deferred accounting for the iPhone - of $10.4 billion in revenue and profits of $1.88 a share; he says those number may be disappointing to some investors, since the figures are down sequentially. For the September quarter, the company had posted non-GAAP profits of $2.69 a share.

As result of the difficult consumer spending environment, Sacconaghi writes, there could be downside in sales of all three major Apple products - Macs, iPods and iPhones. He sees sales for the December quarter of 2.57 million Macs, 3.5 million iPhones and 18.1 million iPods. Drilling down, he sees Mac notebooks up 30% versus a year earlier, but with desktops down 15%. For iPods, the forecast represents an 18% decline; he sees iPod ASPs of $148, down from $150 in FY Q4 and $181 a year ago.

As for guidance, he expects the company to be “conservative as usual.” He thinks Apple could guide to March quarter revenue of $7 billion to $7.5 billion, below the consensus at $8.2 billion. (His own estimate is $7.7 billion.) Goldman Sachs last week similarly warned that the company could offer guidance for the March quarter below the Street’s current forecasts.

For the full year, Sacconaghi reduced his EPS estimate to $5.05 a share, from $5.50; the Street sees $5. He expects sales for the fiscal year of 10.3 million Macs, 45.4 million iPods and 18.2 million iPhones.

Sacconaghi noted that his financial model anticipates new Mac and iPhones this year at modestly lower price points; he thinks an $800 MacBook or $950 iMac could boost the addressable market for each by 75%.

“Near-term data points may not be encouraging, given the lack of new products at MacWorld and Apple’s refusal to cut prices; and the recent degradation in CEO Steve Jobs’ health situation clearly casts some
uncertainty on the company’s future,” he writes. But Sacconaghi remains an Apple bull, asserting that “there is significant longer-term value in the stock.”

Apple reports December quarter results after the close on Wednesday.

On Friday, Apple fell $1.05, or 1.3%, to $82.33.

Original post

Comments

[2bitRick:]

Eric again regurgitates more analyist CRAP

GOD it sure does smell around here.

Jan 20 01:21 PM

[TraderMom:]

I guess it is time to short AAPL again

Jan 20 10:11 PM

[Roger Knights:]

Isn't Toni a female name?

Jan 21 11:41 AM