Apple: Earnings Expected Flat, Growth Ahead For 2014

Apr. 23, 2014 3:55 AM ETApple Inc. (AAPL)GOOG, GOOGL47 Comments
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3D Investing
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Summary

  • Apple's Q2 2014 Earnings Report is expected to similar to Q2 2013.
  • Surveys show high demand for a larger 4.7" iPhone 6.
  • Apple's iPhone 6 will significantly increase hardware and software sales.

Analysts estimates Apple (NASDAQ:AAPL) Q2 2014 revenue will land around $43.5B and earnings per share of $10, roughly the same as Q2 2013. I expect Apple to slightly beat that estimate due to its recently inked China Mobile deal. This deal opens up Apple to potentially 750M customers but most will not be able to afford the iPhone 5S at $5288 Yuan unsubsidized. That's about $870 USD and out of range for most Chinese. There's been nothing indicating the iPhone 5S/C was a big hit or a flop. The unexpected news is that customers preferred the 5S over the 5C. That should raise ASP leading me to believe it will beat expectation by a hair.

Bigger Is Better

Apple users have been asking for a larger screen on the iPhone for quite some time. During Steve Jobs's reign, iPhone got a modest .5" increase to 4" from the iPhone 4S to iPhone 5/5S. That still pales in comparison to the large high definition 5" screens of high end Android/Windows smartphones like Nokia (NOK) Lumina Icon. Even Apple had to admit they are losing potential sales in their internal study.

Source

Are Growth Rates Really Decreasing?

When you look at percentage growth of iPhones, it doesn't look favorable to Apple's growth. Yes, there is deceleration of growth but it is because nominal numbers have increased dramatically making it difficult to keep up high percentage growth. The chart below also went from annual to quarterly sales growth which caused an inconsistency in data presentation. When you look at Apple's iPhone sales chart, it tells a different story.

Source

Observing Apple's quarterly sales from 2007 to 2014, there's nothing alarming about the deceleration of growth. Apple's iPhone sales show a general upward trend with no indication of stagnation.

Growth Deceleration Could Reverse

ChangeWave

This article was written by

3D Investing profile picture
349 Followers
My background is in Financial Management and Logistics.

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