Apple: The Final Countdown

Jul.22.14 | About: Apple Inc. (AAPL)


Apple earnings are just hours away.

Revenue estimates have increased as analyst upgrades pour in.

Reports of large iPhone 6 orders coming.

In just a few hours, Apple (NASDAQ:AAPL) will report its fiscal third quarter. Yesterday, I provided my official earnings preview, but I wanted to circle back with a couple of last minute updates as earnings approach. The first important item to note is that fiscal Q3 revenue estimates have continued to increase. As of approximately 11AM on Tuesday, Yahoo! Finance had a revenue average of $37.99 billion, up from $37.93 billion, and Fortune had an average of $38.01 billion. Apple's guidance was for $36 billion to $38 billion, so analysts are now at the exact upper end of Apple's range. As I covered in my preview, expectations are high after last quarter's huge blowout. My official prediction was for $38.122 billion.

Additionally, we've seen a number of positive analyst notes in recent days as we approach the report. Yesterday, JMP Securities upgraded Apple from Market Perform to Market Outperform, putting a $135 price target on the stock. That's more than 40% upside from where shares currently trade. We also saw UBS raise its price target on Apple from $100 to $115 on gross margin expectations.

On Tuesday, we also saw an interesting analyst note that coincides with a recent Wall Street Journal report. Cowen believes that there is upside potential to iPhone estimates, and that wall street is underestimating Apple's Q4 potential. This seems to match a recent Wall Street Journal report that Apple has ordered 70-80 million iPhone 6 units to be manufactured by December 30th, up from an initial order of 50-60 million for the 5S/5C last year.

So what are the key takeaways today? Well, the late bump in revenue estimates makes it slightly harder for Apple to beat. Apple will now need to surpass the high end of its guidance range to beat estimates. Additionally, the upgrades and report of a huge iPhone 6 order could be positive for Apple's next few quarters. I think this news will have more of an impact on Apple's December-ending fiscal Q1, but if Apple thinks sales will be strong, fiscal Q4 guidance may come in a little higher than we would normally expect. Rather soon, we'll know for sure.

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