Expect Apple's December Earnings to Grow 37%

The Street consensus for Apple’s Q1 2010 earnings is $2.04 on $11.9B in revenues. Depending on how many shares outstanding are assumed (due to dilution, I am using 920M), this equates to a profit margin of 15.7%, which sounds reasonable and is consistent with recent performance. My estimate of GAAP earnings is $2.44 on revenues of $12.5B, or an eye popping 17.9% profit margin. This even blows away the Q4 2009 profit margin of 16.9%, which had an unusually low 26% tax rate. I used a 30% tax rate, so how can the profit margin be so high? It is a combination of the operating leverage provided by the high margin iPhone and a very linear operating expense curve.

Below are my GAAP and non-GAAP revenue and earnings estimates for Q1 2010 with year over year GAAP EPS growing 37% while non-GAAP EPS grows at nearly a 44% rate.

I will update these results as prior to earnings release as the estimates solidify for numbers of units shipped.

Full disclosure: Author is long AAPL.

Comments

[Roger Knights:]

The AAPL tree is growing to the sky--grab a branch and hang on!

Nov 10 09:22 AM

[Advill:]

A review of your numbers based in the DISASTER that Apple is facing in China nowdays is important.

Is incredible how they losed ground before the chinese realities, the China team of Apple is not getting any result.

Nov 10 11:39 AM

[maniac:]

As long as the iPhones are sold without wi-fi capability in China, the market will not take off but the grey market for an unaltered iPhone will continue on (the Hong Kong iPhone market will be selling very well). This is bad for China Unicom but not for Apple because the company will still be recording a sale.


On Nov 10 11:39 AM Advill wrote:

> A review of your numbers based in the DISASTER that Apple is facing
> in China nowdays is important.
>
> Is incredible how they losed ground before the chinese realities,
> the China team of Apple is not getting any result.

Nov 10 12:09 PM

[Michael J. ...:]

Question: Are any mobile phones in China permitted to use wi-fi? If so, why is AAPL prohibited from doing so? The Chinese are generally unfair competitors so it wouldn't surprise if they purposely put AAPL at a competitive disadvantage in their own market.

Nov 10 04:14 PM

[GSlusher:]

Advill, you've been told before that Apple has ALREADY sold millions of iPhones in China--indirectly, but a sale is a sale. Sounds like you're closing your eyes, covering your ears, and yelling "NaNaNaNa" to shut out the facts when they threaten your conclusions.


On Nov 10 11:39 AM Advill wrote:

> A review of your numbers based in the DISASTER that Apple is facing
> in China nowdays is important.
>
> Is incredible how they losed ground before the chinese realities,
> the China team of Apple is not getting any result.

Nov 10 04:17 PM

[neutrino23:]

This is a temporary ban that has already been lifted. Once they sell out of current stock the new phones will have WiFi.

www.macrumors.com/2009.../

Nov 10 07:15 PM

[Turley Muller:]

The iPhone will in china will get wifi in a matter of months. They use a WAPI standard and at the time of production WIFI wasn't approved. It was approved after the iPhone went into production so I expect to see it included in the next production run


On Nov 10 04:14 PM Michael J. Golde wrote:

> Question: Are any mobile phones in China permitted to use wi-fi?
> If so, why is AAPL prohibited from doing so? The Chinese are generally
> unfair competitors so it wouldn't surprise if they purposely put
> AAPL at a competitive disadvantage in their own market.

Nov 11 02:55 AM