CJ Takeaway #1: Giving guidance ranges has led to smaller differences in forecasts among all the analysts. I believe this was one of the main motivations since expectations were getting out of control and higher than the company was going to be able to achieve, much less beat.
CJ Takeaway #2: My revenue estimate is $42.5 billion vs. the average Street analyst estimate of $42.4 billion. Guidance for revenue was between $41 billion (up 5% year over year) and $43 billion (up 10%). It is worthwhile to note that even when Apple gave revenue guidance ranges between the December 2008 to the June 2010 quarters the high-end of guidance was beaten by $167 million to $4 billion.
CJ Takeaway #3: My EPS estimate is $9.90 vs. guidance of $9.24 to $10.24 and the average Street analyst estimate of $10.01. All the estimates are significantly lower than the prior years $12.30. Even though revenue is expected to be higher year over year Apple’s gross margin guidance of 37.5% to 38.5% is almost 10% or 1000 basis points lower than the previous years result of 47.4%. Gross margin guidance is also a bit lower than last quarters 38.6%.
CJ Takeaway #4: The recent sentiment on the company has been very negative with a number of analysts lowering numbers. The stock is down 41% from its $702 closing high and the shares are in a short-term oversold position. As long as the results and guidance are in-line the stock should rally.
Source: Stockcharts.com
As you can see in the graph there is a very tight range for the average revenue estimates from the Street and Independent analysts. The average dropoff of 22% from the December quarter is greater than the past four years results which have ranged between a decrease of 8% and 15%.
Source: Company reports and Fortune’s Philip Elmer-Dewitt
There is also a very tight range between the Street and independent analysts. You can see on the graph the steep drop in EPS from the December quarter which is much greater than the past four years.
Source: Company reports and Fortune’s Philip Elmer-Dewitt
The Independent analysts tend to have higher revenue and EPS projections than the Street analysts. One reason is that the Street analysts like to have some cushion in their numbers so that the company can beat their forecasts.
It is interesting to see that the highest revenue and EPS estimates of $47.69 billion and $11.55 respectively, belong to a Street analyst, Hendi Susanto at Gabelli & Co.
Source: Fortune’s Philip Elmer-Dewitt
Disclosure: My family and I own Apple shares
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