Anecdotal evidence indicates there are no longer chronic shortages of iPhone 5s at bricks and mortar stores in the US and delivery dates on orders through the online Apple store have dropped to a week. This indicates ample supplies ahead of the high volume shipments to the authorized carriers on China's mainland. Supply appears to on track with management's expectations expressed during the September conference call with analysts. The increase in iPhone 5 supplies is good news for all those with an interest in Apple.
I'm glad you found a solution that works for you. Among the reasons Apple chose to introduce the iPad mini is the education market. iPads are quickly replacing PCs in the K-12 environment and the mini will perform very well during the spring education buying season.
There are consumers such as yourself interested in one handheld device larger in size than what Apple currently produces. However, the iPhone will capture close to 50% of US smartphone marketshare this quarter. In the Asia-Pacific region, which may replace Europe as Apple's second largest revenue region as early as this quarter, the overriding preference among consumers is for smaller devices, not larger devices.
Based on the extended useful life of Apple products, the company prices its products attractively for consumers. For example, my current laptop is a 2002 PowerBook G4. It's been used every day for the past ten years. Today, consumers can often resell their used iPhones for more than the subsidized price at the time of original purchase.
On a sequential basis, Apple will experience a modest drop in margin this quarter. This will occur because of manufacturing changeovers, not issues related to competition. In the December and March quarters this fiscal year the rates of revenue growth will exceed the rates of earnings growth due to extraordinarily high gross margin in the prior-year periods. The rates of earnings growth will exceed the rates of revenue growth again beginning in the June quarter and continue through at least the March quarter of FY2014.
Apple continues to achieve extraordinarily high average gross margin due in part to carrier iPhone subsidies. The build costs per unit for the iPhone 5S may be lower than the build costs for the current flagship handset. This will provide for attractive gross margin in the December and March quarters next fiscal year.
I do expect the global smartphone market to "peak" or enter the first stages of maturity in the latter half of CY2013. To sustain rates of revenue growth on par with the rates of growth achieved over the past five years, Apple will need to identify the next global market management intends to disrupt no later than the first half of CY2014. Apple will sustain average revenue growth greater than 30% through at least FY2013 and the first half of FY2014.
Much of Apple's revenue growth over the past three fiscal years has been achieved through geographic expansion, particularly in China. Greater China represented about 15% of Apple's revenue in FY2012. Essentially untapped markets including Brazil, India and Russia will deliver growth opportunities over the next three years. But growth in those markets will not come as quickly as Apple's rapid growth in greater China.
Apple's growth is best measured by the growth in the company's global customer base, not the growth in unit sales of any one of the company's popular digital device lines in any one particular quarter. Apple manages for margin and manages for yield per customer. There are vast regions that remain virtually untapped by Apple for product sales. But infrastructure development to create sales in those regions will take time and building out the retail store presence is vital for creating new customer relationships and introducing Apple products to hundreds of millions of new customers over the next five years.
Apple's gross margin will move above 40% as early as the March quarter and remain above that threshold for the next four consecutive quarters. Among the reasons Apple's gross margin remains the envy of the industry is because of manufacturing and supply chain management. Also, Apple develops its own OS, designs its own chips and sells a high percentage of the company's products through its own distribution channels. Each of these factors contribute to high gross margin.
The so-called "Law of Large Numbers" does not apply. In the current fiscal year, 80% of Apple's revenue will be derived from products that did not exist in the market as recently as six years ago. Chances are six years from today more than 50% of Apple's revenue will be derived from products that are only now in early stages of development.
There are large and essentially untapped regional markets for Apple's products and the company is the only maker of iOS-based devices. Apple will maintain high margin and the leadership in digital device revenue share even as more competitors enter the digital device markets.
Android is an amalgamation of device makers competing more with one another than any one Android device maker successfully compete with Apple. Apple's gross margin is pressured in the current quarter due to manufacturing changeovers that do not impact the marginal cost of each additional unit sold. Carriers are willing to pay over $400 in subsidies to provide the iPhone 4 at $0 to customers in the States and the iPhone 5 continues to deliver high average selling prices for Apple.
Competition among Android handset makers will continue to increase. But that doesn't necessarily mean more competition for Apple. Revenue share is more important to Apple than nominal market share numbers and management has stated the company will manage its operations for margin, not market share.
Apple 'Slingshot' In Full Effect - Part 3 [View article]
msftx:
Apple will deliver record revenue and earnings in the December quarter. But the rate of earnings growth will be tempered by the 14-week prior-year period (versus 13 weeks this year) and lower gross margin year-over-year. Be careful with your December quarter expectations for reported revenue and earnings growth rates. The share price will rebound in time and the June quarter will deliver very strong revenue and earnings growth rates year-over-year.
Apple is currently selling at a deep discount based on fundamentals and prospects for growth this fiscal year and next fiscal year. Long-term investors will be rewarded for their patience and the share price will recover from the current lows. I do expect Apple to beat Street expectations for the quarter and for the iPhone 5 to remain at peak demand longer than the handset it replaced.
Apple 'Slingshot' In Full Effect - Part 3 [View article]
bailinnumberguy:
Overall market conditions are obviously impacting Apple's share price performance as much as any factor or factors specific to the company. The iPad mini in its first iteration will be a big success this holiday season. Apple will increase the product line's value proposition for consumers as early as late spring.
Apple does not contract specifically for peak manufacturing capacity. Apple manages for margin. There's no credible evidence of unusual supply constraints or shortages of the iPhone 5 during its quarter of initial release. Apple will sell every iPhone made during the quarter and peak demand will remain in place through much of the March quarter.
Long-term investors will be rewarded. But be patient on near-term expectations.
Apple 'Slingshot' In Full Effect - Part 3 [View article]
madbcolumbus:
In the year-ago quarter Mac desktop sales represented about 4.18% of Apple's reported revenue. In the recent September quarter Mac desktop sales represented about 3.49% of reported revenue. Even if the new iMacs were delayed until the March quarter, the impact would not be significant to the company's current quarter results.
More importantly, Apple's ability to meet expectations for iPhone 5 shipments to company's carriers on China's mainland before the end of December will materially impact not only the rate of revenue growth, but also the gross margin for the period.
I do caution past patterns in and around December quarter earnings may not apply this year and the October through March period for Apple has become a seamless six-month period. Selling pressure on the shares will eventually ease. I don't suggest investors sell into the downturn. The share price will rebound over the next few months and the June quarter will deliver strong revenue and earnings growth rates in comparison to the FY2012 results.
Apple will surpass Street expectations for the current quarter and the iPhone 5 will deliver strong unit sales gains in the October through March revenue and earnings growth season. Patience and knowledge are among a small investor's best and most effective resources.
Apple is growing horizontally (customer base) while growing vertically (unit sales). Market share numbers are deceiving because iOS devices tend to remain in use by the original owners far longer than devices made by competitors and the devices are often put in use by a second owner. This is why tracking the rate of growth in the number of iTunes accounts and the rate of growth in iTunes revenue are important in understanding the rates of growth in Apple's expansive eco-system.
Developers and content providers are interested in the size of an addressable market, not the number of units sold in a particular quarter. Content sells devices and Apple is delivering billions of dollars in revenue to iOS developers each year.
When Apple is viewed as a global eco-system approaching one-half billion customer accounts backed by credit cards and several major consumer markets yet to be fully explored, one begins to glimpse Apple's long-term revenue and earnings growth potential.
I expect share price appreciation to track fairly closely to the rate of eps growth. In a seven-week period Apple moved to the high end of a three-year valuation range relative to earnings and then moved to the low-end of the same range. Meanwhile, cash per share continues to build and the company is poised to report record revenue and earnings in the December quarter. I do caution to pause when the shares reach 16x trailing 12-month earnings and to evaluate valuations below 13x trailing earnings as entry opportunities.
Due to the fixed cost components of COGS, Apple will most likely report a higher rate of revenue growth than earnings growth in the December quarter. Unit sales volume will heavily influence average cost per unit sold. Gross margin will improve through the March and June quarters and the June quarter may deliver the highest eps growth rate of the fiscal year.
Your comments are akin to calling a football game with five minutes remaining in the first quarter. As I said before, let's compare notes on the price target in early September.
12-month price targets (common for most tracked equities) provide context during short-term sell-offs in the shares. Please see my recent post that addressed the company's currently low valuation:
Why Apple Will Beat The Street [View article]
Anecdotal evidence indicates there are no longer chronic shortages of iPhone 5s at bricks and mortar stores in the US and delivery dates on orders through the online Apple store have dropped to a week. This indicates ample supplies ahead of the high volume shipments to the authorized carriers on China's mainland. Supply appears to on track with management's expectations expressed during the September conference call with analysts. The increase in iPhone 5 supplies is good news for all those with an interest in Apple.
Why Apple Will Beat The Street [View article]
I'm glad you found a solution that works for you. Among the reasons Apple chose to introduce the iPad mini is the education market. iPads are quickly replacing PCs in the K-12 environment and the mini will perform very well during the spring education buying season.
There are consumers such as yourself interested in one handheld device larger in size than what Apple currently produces. However, the iPhone will capture close to 50% of US smartphone marketshare this quarter. In the Asia-Pacific region, which may replace Europe as Apple's second largest revenue region as early as this quarter, the overriding preference among consumers is for smaller devices, not larger devices.
Why Apple Will Beat The Street [View article]
Why Apple Will Beat The Street [View article]
On a sequential basis, Apple will experience a modest drop in margin this quarter. This will occur because of manufacturing changeovers, not issues related to competition. In the December and March quarters this fiscal year the rates of revenue growth will exceed the rates of earnings growth due to extraordinarily high gross margin in the prior-year periods. The rates of earnings growth will exceed the rates of revenue growth again beginning in the June quarter and continue through at least the March quarter of FY2014.
Apple continues to achieve extraordinarily high average gross margin due in part to carrier iPhone subsidies. The build costs per unit for the iPhone 5S may be lower than the build costs for the current flagship handset. This will provide for attractive gross margin in the December and March quarters next fiscal year.
I do expect the global smartphone market to "peak" or enter the first stages of maturity in the latter half of CY2013. To sustain rates of revenue growth on par with the rates of growth achieved over the past five years, Apple will need to identify the next global market management intends to disrupt no later than the first half of CY2014. Apple will sustain average revenue growth greater than 30% through at least FY2013 and the first half of FY2014.
Much of Apple's revenue growth over the past three fiscal years has been achieved through geographic expansion, particularly in China. Greater China represented about 15% of Apple's revenue in FY2012. Essentially untapped markets including Brazil, India and Russia will deliver growth opportunities over the next three years. But growth in those markets will not come as quickly as Apple's rapid growth in greater China.
Why Apple Will Beat The Street [View article]
Apple's growth is best measured by the growth in the company's global customer base, not the growth in unit sales of any one of the company's popular digital device lines in any one particular quarter. Apple manages for margin and manages for yield per customer. There are vast regions that remain virtually untapped by Apple for product sales. But infrastructure development to create sales in those regions will take time and building out the retail store presence is vital for creating new customer relationships and introducing Apple products to hundreds of millions of new customers over the next five years.
Why Apple Will Beat The Street [View article]
Apple's gross margin will move above 40% as early as the March quarter and remain above that threshold for the next four consecutive quarters. Among the reasons Apple's gross margin remains the envy of the industry is because of manufacturing and supply chain management. Also, Apple develops its own OS, designs its own chips and sells a high percentage of the company's products through its own distribution channels. Each of these factors contribute to high gross margin.
Why Apple Will Beat The Street [View article]
The so-called "Law of Large Numbers" does not apply. In the current fiscal year, 80% of Apple's revenue will be derived from products that did not exist in the market as recently as six years ago. Chances are six years from today more than 50% of Apple's revenue will be derived from products that are only now in early stages of development.
There are large and essentially untapped regional markets for Apple's products and the company is the only maker of iOS-based devices. Apple will maintain high margin and the leadership in digital device revenue share even as more competitors enter the digital device markets.
Android is an amalgamation of device makers competing more with one another than any one Android device maker successfully compete with Apple. Apple's gross margin is pressured in the current quarter due to manufacturing changeovers that do not impact the marginal cost of each additional unit sold. Carriers are willing to pay over $400 in subsidies to provide the iPhone 4 at $0 to customers in the States and the iPhone 5 continues to deliver high average selling prices for Apple.
Competition among Android handset makers will continue to increase. But that doesn't necessarily mean more competition for Apple. Revenue share is more important to Apple than nominal market share numbers and management has stated the company will manage its operations for margin, not market share.
Apple 'Slingshot' In Full Effect - Part 3 [View article]
Apple will deliver record revenue and earnings in the December quarter. But the rate of earnings growth will be tempered by the 14-week prior-year period (versus 13 weeks this year) and lower gross margin year-over-year. Be careful with your December quarter expectations for reported revenue and earnings growth rates. The share price will rebound in time and the June quarter will deliver very strong revenue and earnings growth rates year-over-year.
Apple is currently selling at a deep discount based on fundamentals and prospects for growth this fiscal year and next fiscal year.
Long-term investors will be rewarded for their patience and the share price will recover from the current lows. I do expect Apple to beat Street expectations for the quarter and for the iPhone 5 to remain at peak demand longer than the handset it replaced.
Apple 'Slingshot' In Full Effect - Part 3 [View article]
Overall market conditions are obviously impacting Apple's share price performance as much as any factor or factors specific to the company. The iPad mini in its first iteration will be a big success this holiday season. Apple will increase the product line's value proposition for consumers as early as late spring.
Apple does not contract specifically for peak manufacturing capacity. Apple manages for margin. There's no credible evidence of unusual supply constraints or shortages of the iPhone 5 during its quarter of initial release. Apple will sell every iPhone made during the quarter and peak demand will remain in place through much of the March quarter.
Long-term investors will be rewarded. But be patient on near-term expectations.
Apple 'Slingshot' In Full Effect - Part 3 [View article]
In the year-ago quarter Mac desktop sales represented about 4.18% of Apple's reported revenue. In the recent September quarter Mac desktop sales represented about 3.49% of reported revenue. Even if the new iMacs were delayed until the March quarter, the impact would not be significant to the company's current quarter results.
More importantly, Apple's ability to meet expectations for iPhone 5 shipments to company's carriers on China's mainland before the end of December will materially impact not only the rate of revenue growth, but also the gross margin for the period.
I do caution past patterns in and around December quarter earnings may not apply this year and the October through March period for Apple has become a seamless six-month period. Selling pressure on the shares will eventually ease. I don't suggest investors sell into the downturn. The share price will rebound over the next few months and the June quarter will deliver strong revenue and earnings growth rates in comparison to the FY2012 results.
Apple will surpass Street expectations for the current quarter and the iPhone 5 will deliver strong unit sales gains in the October through March revenue and earnings growth season. Patience and knowledge are among a small investor's best and most effective resources.
Apple Price Target: $950 Per Share [View article]
Apple is growing horizontally (customer base) while growing vertically (unit sales). Market share numbers are deceiving because iOS devices tend to remain in use by the original owners far longer than devices made by competitors and the devices are often put in use by a second owner. This is why tracking the rate of growth in the number of iTunes accounts and the rate of growth in iTunes revenue are important in understanding the rates of growth in Apple's expansive eco-system.
Developers and content providers are interested in the size of an addressable market, not the number of units sold in a particular quarter. Content sells devices and Apple is delivering billions of dollars in revenue to iOS developers each year.
Apple Price Target: $950 Per Share [View article]
When Apple is viewed as a global eco-system approaching one-half billion customer accounts backed by credit cards and several major consumer markets yet to be fully explored, one begins to glimpse Apple's long-term revenue and earnings growth potential.
Apple Price Target: $950 Per Share [View article]
I expect share price appreciation to track fairly closely to the rate of eps growth. In a seven-week period Apple moved to the high end of a three-year valuation range relative to earnings and then moved to the low-end of the same range. Meanwhile, cash per share continues to build and the company is poised to report record revenue and earnings in the December quarter.
I do caution to pause when the shares reach 16x trailing 12-month earnings and to evaluate valuations below 13x trailing earnings as entry opportunities.
Due to the fixed cost components of COGS, Apple will most likely report a higher rate of revenue growth than earnings growth in the December quarter. Unit sales volume will heavily influence average cost per unit sold. Gross margin will improve through the March and June quarters and the June quarter may deliver the highest eps growth rate of the fiscal year.
Apple Price Target: $950 Per Share [View article]
Your comments are akin to calling a football game with five minutes remaining in the first quarter. As I said before, let's compare notes on the price target in early September.
Apple Price Target: $950 Per Share [View article]
12-month price targets (common for most tracked equities) provide context during short-term sell-offs in the shares. Please see my recent post that addressed the company's currently low valuation:
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