I have compiled over a dozen sell-side analysts projections for Apple’s revenue, gross margin, EPS, iPhone unit sales, iPhone ASPs (Average Selling Prices) and iPad units for the December and March quarters. These include projections from Andy Hargreaves at Pacific Crest who has a Sector Perform rating, Katy Huberty at Morgan Stanley, Steve Milunovich at UBS, Gene Munster at Piper Jaffray, Ben Reitzes at Barclays and Toni Sacconaghi at Bernstein. (Note that I own Apple shares).
While these estimates are from sell-side analysts it would be typical for a company on a roll like Apple for the buy-side analysts (or the ones at investment firms that have to decide to buy, hold or sell a company’s shares) to have their estimates above the sell-side analysts. I would estimate that the buy-side projections are about 5% higher.
Analyst’s revenue estimates at high-end of guidance
The fourteen sell-side analysts I have numbers for are projecting Apple to generate $66.2 and $54 billion of revenue in the December and March quarters, respectively. The December quarter forecast is at the high-end of Apple’s guidance of $63.5 to $66.5 billion which would be an increase of 10.3% to 15.5% year over year.
Over the past three years Apple’s sequential revenue decline has been 15.4%, 20.0% and 20.7% from the December to March quarters. The sell-side analysts expect revenue to decline to $54 billion or down 18.5%.
Gross margin expectations are also at the high-end of guidance
Apple’s gross margin guidance is 37.5% to 38.5% for the December quarter, which compares to September’s quarter gross margin of 38.0% (guidance was 37.0% to 38.0%) and when you remove warranty accruals gross margins would have been 40.1% last quarter.
The sell-side analysts I am monitoring are projecting Apple’s gross margins to come in at 38.4% and 38.7% in the December and March quarters, respectively. Each 0.1% change in gross margin affects EPS by $0.01.
EPS could increase by 20% or more year over year the next two quarters
When you use Apple’s guidance components December quarters EPS comes in between $2.33 to $2.53. The sell-side analysts are projecting EPS of $2.52 (an increase of 22% year over year) and $1.99 (up 20%) in the December and March quarters, respectively. Prior to September quarter’s results and December quarter guidance the sell-side analysts were projecting December quarter’s EPS to be $2.40.
iPhone unit sales forecasts are clustered in the mid-60 million units
Of the dozen sell-side analysts I have projections from they are expecting Apple to sell 63.9 million iPhones in the December quarter, an increase of 25% year over year, and 51.5 million in the March quarter, an 18% increase. The unit drop-off is forecast to be 20% quarter over quarter which compares to down 22% and 14% the past two years, respectively.
The analyst’s iPhone projections range from a low of 61 million by both Chris Caso at Susquehanna and Gene Munster at Piper Jaffray to a high of 67 million by Steve Milunovich at UBS. I do believe that Apple could sell 70 million or more iPhones, it will depend if their suppliers can build them in time to be sold. The high demand can be seen in lead-times staying longer later for any iPhone launch I have monitored, strong demand in Japan, large increases in China Mobile’s 4G customer base and Kantar’s latest survey showing iPhones’ gaining significant market share in multiple countries post the model 6 launch.
Each 1 million iPhone unit increase impacts revenue by about $670 million, using my current $670 ASP projection, and EPS by about $0.03. iPhone’s could generate 67% of Apple’s total revenue which would positively impact gross margins and EPS.
iPhone ASPs helped by the iPhone 6 Plus and memory pricing
The past three years the sequential increase in the iPhone’s ASP from the September to December quarter has been 4%, 4% and 10%, respectively. Two factors that should help this years ASP increase from $603 in the September 2014 quarter are the 6 Plus selling for $100 more than comparable model 6’s and an additional $100 getting a user 64GB of total memory vs. only 32GB in earlier iPhones.
There is a wide range in the sell-side analysts projections for the iPhone’s ASP. The low is $618 by Ben Reitzes at Barclays and the high is $705 by Andy Uerkwitz at Oppenheimer. The average is $654 and I expect the ASP to be at least $670 and could hit $700.
Each $10 increase in ASP based on 70 million iPhones increases revenue by $700 million and EPS by $0.03.
iPad unit sales
The December quarter should be the fourth quarter in a row that iPad’s have experienced year over year unit declines. The situation will only be made worse by the iPhone 6 Plus impacting iPad mini sales for the first time. It does appear from advertisements such as the one below from Best Buy that the new iPad’s are not in hot demand since discounts are already being offered on them.
The 11 analysts I have projections from are expecting iPad unit sales of 22 million with a range of 18 to 25 million for the December quarter. These compare to the 26 million that were sold last year and I am projecting that unit sales could come in at 19 million with channel inventory helping by almost 1 million units.
The analysts are expecting March quarter iPad unit sales of 16 million, which would be almost flat from last years 16.35 million. That is too optimist in my view as I am looking for 13 million.
