On Monday, I talked about Citi's Jim Suva's research note out on
In his (Andy Hargreaves) research note last night he raises his FQ:1 for Apple iPhone unit sales to 66.9 million from 62.4 million but makes it a point to say that his estimate is still below both buy-side and sell-side estimates at present. Hargreaves says that his lower than consensus iPhone unit sales estimates for Apple's FQ:1 will cause the company to guide revenues for the quarter "well below" the current consensus revenue estimate of $76.4 billion for the December quarter.
No kidding, Andy.
Then he flips and says that despite his below consensus unit sales estimates, Apple gross margins will remain stable and that will help cushion any fall-out from his expected lowered revenue and unit sales guidance.
Hargreaves further adds, “Despite our concern about near-term iPhone units, the extraordinary stickiness of Apple’s iOS platform and its ongoing cash-return program are likely to limit multiple contraction from current levels, which should limit downside."
Basically, Hargreaves has played the sell-side CYA card perfectly. According to him numbers will disappoint but gross margins will remain stable so shares of Apple should remain stable. If stock falls, he can point to his lower than expected unit sales forecast and expectations of a revenue outlook warning and if they don't fall he can point to his "limited multiple contraction" comment.
This is typical of Wall Street sell-side research where heads of research or directors of research (men and women that run Wall Street research units) push the analysts to make "actionable" calls. Actionable calls are those that will give a Wall Street firm's army of brokers an excuse/reason to pick up the phone and start calling their clients on a particular "actionable" research note inducing them to buy/sell/add/reduce/short the stock being highlighted by the analyst.
So Jim Suva (research note out on Monday) and Andy Hargreaves (report out yesterday) are the current wolves in sheep's clothing on Apple. I am sure we will have a couple more who will more than likely be outright wolves as well.
Hargreaves maintains a Sector Weight rating on Apple. Suva also has a Buy rating on the shares despite his current negative views.
If guidance and revenue forecasts for Q1:16 are going to come in "well below" should these two analysts be advocating a Sell at least? Heck, maybe even a "Strong" Sell?
My take is a lot simpler. If Hargreaves is right and Apple "warns" on Q1 revenues and unit sales guidance, say good-bye to the triple digits and say hello to double digits. Buybacks, cash hoard, management song and dance won't matter a whit.
Incidentally, just something positive to think about with your morning coffee. Samsung actually guided higher for its September quarter profits by about 12-13%. The guide-up ends a two year profitability slide at the Korean manufacturing giant.
Implications for the best selling smart=phone company in the world?
Hmmm.
(please note I am long shares of Apple, long and short options)
