Apple’s Implicit Earnings Forecast for Next Quarter: A Drop

Smart analysis by Mark Rogowsky at Forbes:

A lot of people are confused and think Apple didn’t provide EPS guidance. They most certainly did, but it requires math. Fortunately, I’ve done the math for you. If you take all the numbers above and assume the share count stays constant (it actually fell by amount 1 million shares over the past quarter), you get a range between $9.25 and $10.50 per share.

Add it all up and you get higher expenses, much lower gross margin and not enough revenue to keep earnings per share from falling from last year’s $12.30.

So the predictions that the just-reported holiday quarter would be Apple’s first year-over-year earnings drop since 2003 were wrong, but next quarter — at least by Apple’s guidance, which they now claim is what they really expect, not sandbagged — the range of Apple’s revenue guidance works out to $9.something billion in net income. Even at the high end of that range, close to $10 billion, that would be a significant drop from the year ago Q2 2012’s $11.6B.

Rogowsky’s explanation for the drop is compelling:

Clearly, iPad is significantly more seasonal, but it’s also becoming a much less expensive product thanks to the popular Mini. If you compare to last year, iPad unit sales are up 50% in the holiday quarter. If you take them down sequentially by the 20% seen last year, you’d lose about 4.5 million units at $469 — a revenue shortfall of about $2 billion between the quarters. But if you also take down the average price another $25, you lose another $4.5 billion in revenue (over 18 million iPads).

Update: David Barnard points out that Rogowsky’s math doesn’t add up there: $25 times 18 million units comes to $450 million, not $4.5 billion. “Sammy the Walrus IV” argues it’s simply about margins: last year Apple’s margin for Q2 was 47 percent; their forecast for Q2 this year is 38 percent.

Thursday, 24 January 2013

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