Seeking Alpha
Research analyst, long/short equity, tech
Profile| Send Message|
( followers)  

Apple (AAPL) will be releasing its first post-Steve Jobs Q4 results on Oct 18th, after the markets close. Like the previous quarter, we expect Apple to post strong results again as the company seems to have ironed out its supply chain issues for the iPad and released a refreshed look of MacBook Air, Mac Mini and OS X Lion. The key items to watch out for during the release will be the new CEO, Tim Cook’s guidance for the future along with the sales figures for the MacBook and iPad as well as any indications of gross margin impact due to increasing competition from Research in Motion (RIMM), Nokia (NOK) and Motorola Mobility (MMI) in the smartphone market, and Amazon (AMZN), RIM and Motorola Mobility in the tablet market. We currently maintain a $510 price estimate for Apple stock, which is about 26% above market price.

See our complete analysis for Apple stock here

Start of Post-Jobsian Era

Next week Apple will report its first earnings results post-Steve Jobs. All eyes will be on Tim Cook as analysts are looking for signs of weakness without Jobs. The market has shrugged off any of these concerns rising almost 10% this week on news of strong iPhone pre-orders and the anticipation of a strong results for the quarter. However, there is a risk that the stock might fall in the near term if Tim fails to deliver the same confidence in the future road-map for the coming years. The new iOS 5 debuted yesterday and there were several delays as customers needed to upgrade iTunes and then often wait several hours before downloading the new mobile OS.

iPad Unit Sales Guidance

In an article published earlier, we talked about a report that Apple’s overseas manufacturing partner Foxconn could ship 20 million iPad 2 units to Apple in this quarter, thus achieving 60% sequential growth. (see iPad Shipments Spike in Current Quarter, Likely to Beat Forecasts) We believe that the company has managed to take care of its supply chain constraints and if so, it could easily beat our estimate of 37 million unit sales for this year.

(Chart created by using Trefis' app)

MacBook Sales

During this quarter, Apple released the latest version of its Mac operating system named OS X Lion and slashed its price to $30 resulting in sales of over a million licenses on the very first day of the launch. [1] Other triggers for this quarter include the updates to Mac Mini and MacBook Air. [2] [3]

According to data from NPD, Apple’s Mac sales were up 22% for the first two months of the September quarter. [4] Considering the above triggers, we expect Apple to sell around 4.8 million Macs this quarter.

(Chart created by using Trefis' app)

The All Important: Gross Margin Outlook

Apple could face intense competition from Amazon’s Kindle Fire considering its competitive eco-system and very attractive pricing. (see Amazon’s Kindle Fire is Cheap But No iPad Killer) While we believe this is not an immediate concern for Apple right now, if Apple eventually looks to compete at a lower price point in a bid to fend off the Kindle and the flood of other tablets due to hit the market, this could weigh on gross margins. Also given the launch of the 4S and increasingly popularity of iPads, we look for some updated guidance on gross margin trends and sales mix.

(Chart created by using Trefis' app)

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:

  1. Lion Downloads Top One Million in First Day, Apple press release, July 21st, 2011
  2. Apple Updates Mac mini, Apple press release, July 20th, 2011
  3. Apple Updates MacBook Air With Next Generation Processors, Thunderbolt I/O & Backlit Keyboard, Apple press release, July 20th, 2011
  4. Apple’s Mac Sales Blowing Away Expectations, BusinessInsider quoting NPD Group as the source, September 12th, 2011

Disclosure: No position

Source: Apple Earnings Preview: What We're Watching Post-Jobs