Getting Ready for Apple's Q2 Earnings

Time to get ready: Apple (AAPL) reports earnings for its fiscal second quarter ended March on April 23 and the Street has started fiddling with its numbers. The consensus is for $6.95 billion in revenue and EPS of $1.06 a share.

Bernstein Research analyst Toni Sacconaghi this morning says the numbers are likely to come in a bit of above the consensus; he sees $6.99 billion and $1.12. He says gross margin should expand to 35%, beating the company guidance of 32%, on favorable NAND and DRAM pricing, some new high-margin products like the MacBook Air and the 32 GB iPod Touch, increased iPhone carrier payments, and no significant price cuts aside from the iPod Shuffle.

Sacconaghi is looking for sales of 2.08 million Macs in the quarter, which he notes is slightly below the consensus of 2.2 million. He sees 1.45 million iPhones sold in the quarter, and 10.2 million iPods. He expects both categories to slow in the June quarter, forecasting fiscal Q3 unit sales of 1.39 iPhones and 9.9 million iPods.

Sacconaghi says he expects Apple to guide below consensus for the June quarter, “per its usual practice.” On the other hand, he expects the company to have a strong calendar second half, driven by the roll out of a 3G iPhone, price cuts and/or the launch of the phone into new countries.

For fiscal 2008, Sacconaghi today slightly reduced estimates: he now sees EPS of $5.25 a share, down from $5.27; for ‘09 he goes to $6.36, from $6.50. He says the revisions reflect lower iPod expectations and a greater fraction of unlocked iPhones, which generate no carrier payments for Apple, offset by slightly higher Mac sales and gross margin.

Sacconaghi says that, despite some near-term caution, “Apple’s current valuation is fair to attractive.” He suggests investors revisit the stock post-earnings.

One final note: AT&T (T) reports earnings one day before Apple; you will want to pay attention to anything they say on iPhone unit sales.

Apple today is down $3.98, or 2.58%, to $150.57 just after 1 p.m. EDT.

Comments

[goinbroke:]

I'm sorry...but I don't know anyone that has an Ipod.If I had an extra $500., I would pay the energy bills. I live in Monroe, New
York...Not exactly the sticks.

2008 Apr 11 03:18 PM

[Rod Adams:]

I wonder about goinbroke. He must not get out very much. I work in DC and see hundreds of white earphones dangling from fellow commuter ears every day. My family collection of iPods and Macs continues to grow as we discover new and useful ways to use the increasingly exciting devices. My wife tells me that her Touch is the best gift I have ever given her - she uses it for photos, email, videos, maps, weather reports, and simply showing off. Oh yeah, she also carries a few thousand songs along with her wherever she goes.
I remain a shareholder and a fanboy - though I do not really qualify as a boy since I am nearing 50.

2008 Apr 11 04:47 PM

[Zeon:]

iPods are ubiquitous. Plus, you don't need $500 to buy one. Have to Wonderm goinbroke if you know anything about AAPL.

2008 Apr 11 08:56 PM

[latinefi:]

what does that mean, revisit after earningS?

2008 Apr 11 10:36 PM

[nycDem:]

Here in NYC you can't get on a subway without it seeming like half the riders are listening to iPods/iPhones.

However, I got burned buying Apple stock before the last earning's call...so I'm holding off.

Also, this economy is truly THE WORST. Stock portfolio is waaaay down. So who knows what's going to happen to AAPL.

Somewhat off-topic so please forgive: Meanwhile, Bush says lets keep plowing billions into Iraq. Why, as a tax payer, am I paying for this idiocy? Or I guess I should say, why will my grandchildren be paying for this nonsense? Vote Democratic in November.

2008 Apr 12 01:01 AM

[tom1234:]

eric ---you are finally quoting ----thanks --

2008 Apr 12 08:07 AM

[raman kandola:]

erin just turned long, and bought 500 call contracts. lol !

2008 Apr 12 09:25 AM

[David Lentz:]

Dear AtlanticAve -- "vote Democratic in November"?

Exactly who do you think it is that refuses to start impeachment proceedings?

Of course I understand the reasons why -- Dubya is the best thing to happen to Democrat candidates since sliced bread. No way on Earth that Pelosi wants to get her party mussed up removing a clear and present danger to the nation, if he is pushing move Democrats into office.

There ARE Republican candidates that (meekly) oppose the President, and who have sound thinking behind their actions (at least I think there must be one or two out there), but for the most part, the Democrats are just as bad for the country as the Republicans.

Do us all a favor and don't vote for ANY party, vote instead for individuals who either have a track record that makes sense, and are wiling to follow their conscience when it deviates from their party.

Those individuals may not be running under either the Republican or Democrat banners -- and probably are not, as one of the apparent requirements for party backing is that a candidate obey the party over their own better judgement in all things (either party).

And don't blame Bush, he's only doing what is best for his (and Cheney's) wallets. Of all the people in government, who benefits the most (and it shows in both their tax returns) from $112 oil? That in itself should be grounds for an impeachment investigation, let alone lying us into a war and the countless other items on the list of impeachable offenses that they should be investigated for.

I apologize for taking this thread farther afield. I'm done venting for the moment.

2008 Apr 12 10:06 AM

[cailte:]

Right, Toni S not exactly bearish. He is, though, precise in his sales forecasts. How can he be that specific? I do get the aroma of concern about European sales for iPhone even with the 3G, the global economy generally and whether the American consumer may belt tighten more than currently believed. And, the current share price pullback may reflect the underlying concerns plus profit taking in advance of the traditional second half strength. How low can you go?

2008 Apr 12 12:06 PM

[Ex15:26:]

In this environment I think the best way to play earnings is to sit out and look for the pullback, then buy as we enter the stronger 2nd half of the year.
For really aggressive folks, buying puts might be the thing to do as any statement by management to reduce expectations will be met with severe punishment. The $115 to $120 area looks like a very solid as support. Clearly that's a 20% drop from these levels, but it wouldn't be out of the range of expectations if they actually miss.
I like the company long term and am kicking myself for not buying at the $115 level a couple of weeks ago.
Good luck and use stops!

2008 Apr 12 02:39 PM

[steveballmer:]

AAPL will be down significantly and MSFT will be up! Thus Saith Ballmer!

2008 Apr 12 09:54 PM

[SgtSally:]

"what does that mean, revisit after earningS?"

It means don't buy untill after earnings. This could be down big.

2008 Apr 12 10:15 PM

[goinbroke:]

I apologize...I meant Iphones.
Anyway, I always get suspicious when I see insiders selling a month before an earnings report and what do you think their guidance will be even if it is a decent report. Appel was down 7.40 on Friday. I am not telling you to sell Appel but rather to keep your STOPS updated. People are afraid, the trading volume is down, and the news keeps getting worse.
Keep an eye on AT&T. They are still in the telephone book business. Remember what happened to Donnely?
And one more thing...I don't get out much but I do get around. Good Luck.

2008 Apr 13 08:26 AM

[Ex15:26:]

I asked the lady in my elevator on Friday if she liked her Iphone, simply cause I'm in the market for a new phone. Her response actually shocked me.... she hated it. Said it had poor battery life and the numbers and screen shook or were fuzzy. I'm not sure if this is just an isolated incident or if any of you have noted similar comments, but knowing Apple's products I didn't expect this feedback.
I don't think this has any bearing on earnings, but clearly the AAPL model to contract only with AT&T prevents me from purchasing the Iphone. If it was with Verizon or Sprint, I'd probably buy one, if I could have a couple of raving fans.

2008 Apr 13 10:40 PM

[DSinchrg:]

AtlanticAve: ask your kids if they like paying for illegals education,medical bill,food,etc..don't kid your self of whats r
really bank rupting this country. Its called SOCIALISM

2008 Apr 14 12:44 AM