Will iPhone sales disappoint investors?
Production "hiccups" may depress next week's earnings, warns one analyst
Compared with the increasingly sunny predictions streaming from his competitors, the note Oppenheimer's Yair Reiner sent clients Friday morning was something of a buzz kill.
"We believe Apple could report in line to slightly disappointing [fiscal fourth quarter] revenue," he wrote, advising investors to hold off buying shares until after Monday's quarterly earning's report.
The focus of his concern: the iPhone.
Reiner's estimate for Apple's fourth quarter iPhone sales was already the lowest of all the analysts we surveyed — 6 million, compared with a consensus just over 7 million and a high estimate (from Citibank's Richard Gardner) of 8.05 million.
But even 6 million, he says, could prove too high, due to what he calls "component/manufacturing hiccups."
"The first hint of trouble," he writes, "surfaced during the iPod event on Sept. 9, when Apple implied that ~3.5M phones had been sold with only 21 days left in the quarter. Subsequent checks showed the iPhone 3GS sold out in many markets. Something was clearly preventing Apple from shipping to demand… Consensus estimates imply that 3.5M phones flowed out to customers in the final weeks of 4Q09, which may be too aggressive."
But Reiner is hardly an Apple (AAPL) bear. The thrust of his advice is to "keep some powder dry" and buy like crazy if the stock price falls.
"We'd use any pull-back as an opportunity to aggressively accumulate additional shares ahead of several near-term catalysts: a potentially gargantuan December quarter for iPhone (assuming no further component issues); re-acceleration of Mac growth with the release of the new MacBook and iMacs; and the likely announcement of the tablet in early 2010."
Apple is scheduled to announce its fourth quarter earnings after the markets close on Monday, Oct. 19. Tune in here for our analysis of the results.
[Follow Philip Elmer-DeWitt on Twitter @philiped]
Jim Cramer was right about the mobile internet surge, of which I have cashed in on. He was also right about when to get in and out of the market; I was break-even about 2 months ago… any naysayers have missed out in a big way.
mark,
There is a big difference between rounding off a billion song sold or a billion apps downloaded and rounding off a million iphones.
Rounding off 10 million songs sold at 99 cents each with the music studio keeping 80-90% of the revenue — means only $1 million in revenue for Apple. Same thing for rounding off 10 million apps downloaded with only 20-30% of those apps are paid apps with the average price of paid apps being $2.50 with Apple keeping 30% revenue — that's a little over $2 million in revenue for Apple. Those are NOT material numbers that would affect Apple stock price — Apple can round off as much as they want.
Rounding off 1 million iphones is $600 million in revenue with a gross profit margin of close to 50% — that's $300 million gross profit for Apple. That is a material number that affects Apple stock price — and Apple can't round off by a lot.
Apple said "over 30 million" iPhones on Sept 9, but that did not imply ~3.5m shipped to date in the qtr, because Apple usually does not say "over 31 million" or "over 32 million" or "over 33 million" or "over 34 million." Apple only uses specific figures when referring to 10-Q data, like during its quarterly call. So when Apple said, over 30 million, it implied anything from 3.5m to 8.4m.
We'll see Monday if Yair's or my interpretation is correct.
"Personally, I'm betting this is *the* breakout quarter for Apple, with all parts of the business outperforming expectations. We'll look back and see Oct 2009 as 'the inflection point'."
Haha, better brush up on your calculus there, Ted. If Oct 2009 will be the inflection point, then that means growth slows from here on up to the plateau…..which I highly doubt.
He gets all his research and channel checks from Ashok Kumar. The same guy that said a few days ago that iPhone sales in China have been disappointing even though they don't even go on sale until the end of the month.
Good luck keeping your job Yair!!
Just what I tought, this analyst is trying to talk down the shares so he can buy. What a stupid explanation. And buy after the report?? I say buy now. Its going to 200 easily and you will be chasing it up.
How about "Will iPhone sales cheer investors?"
"Oppenheimer's Yair Reiner sent clients Friday morning was something of a buzz kill." This sounds like a dump and pump article to "churn" accounts and generate "trading" profits for Oppenheimer. No wonder all of the banks and brokerages are doing so well , way ahead of expectations. These "speculative notes" ought to be banned and made criminal.
This is certainly one way to interpret Apple's inability to avoid shortages in iPhone supply ("It's not enormous demand, it's they can't keep up with quality production"). Rogers in Canada has had shortages since day one, US availability has often been constrained, and now we've heard about issues in Italy where they've said they could sell twice the actual supply. Anyone have data from the UK or elsewhere?
If Yair is correct, we have a big problem when results are released on Monday. Personally, I don't think the numbers can be as low as Yair says, but perhaps they will mean that those with the most optimistic forecasts (i.e. over 8 million) have predicted numbers beyond Apple's production capacity.
Personally, I'm betting this is *the* breakout quarter for Apple, with all parts of the business outperforming expectations. We'll look back and see Oct 2009 as 'the inflection point'.
Well some much for the disappointing numbers. Jim Cramer was wrong about this one. But then again no one is right about everything all the time.
Good for the apple stock I already own, sad for the shares I still want to buy. Well if they sell this well in a recession, how will they preform later. So still looking to buy.