Apple analyst Steve Milunovich raised his estimate for the company’s June quarter iPhone sales from 43 to 48 million based upon UBS’ Evidence Lab iPhone Monitor indicating that there is demand for 51.1 million units in the quarter. Milunovich estimates that the Street is modeling Apple to sell 45 million iPhones in the quarter. This raises his June quarter EPS estimate from $1.80 to $1.93 and his fiscal 2015 estimate from $9.04 to $9.17. (Note that I own Apple shares and have sold Puts which is a bullish position).
Milunovich’s UBS Evidence Lab estimates have been close but not too close
Milunovich started publishing his Evidence Lab forecasts two quarters ago and has been too high and too low in its estimates, respectively. In the December 2014 quarter the first estimate was too low by 3.6 million units or 4.8% and for the March 2015 quarter it was too high by 4.8 million or 7.9%.
At 51.1 million units Apple’s iPhone sales will increase 45% year over year compared to 46% growth in the December quarter (49% when adjusted for channel inventory) and 40% in the March quarter (38% adjusted for channel inventory). Milunovich’s Evidence Lab has China accounting for almost half (46% to be exact) of Apple’s iPhone shipments in the June quarter up from 28% a year ago.
On a quarter to quarter basis 51.1 million iPhones would be down 16% (down 15% adjusted for channel inventory) which compares to down 17% (13% with channel inventory) two years ago and down 19% (also 19% with channel inventory) last year. At 51 million it would exhibit its typical seasonal decline which is close to what Kantar’s monthly data shows.
Compared to Morgan Stanley’s Katy Huberty’s AlphaWise projections for the past two quarters Milunovich has been closer to Apple’s actual results . In both of AlphaWise’s first and second projections it has been off by 9% to 10% but at least its bias has been more consistent.
Adds $3.2 billion in revenue and $0.13 to EPS
By increasing his iPhone estimate by 5 million units Milunovich added $3.2 billion in revenue to a total of $51.8 billion vs. guidance of $46 to $48 billion and the Street’s estimate of $48.3 billion. His EPS estimate moved from $1.80 to $1.93 for the June quarter vs. the Street’s $1.74 and a guidance range of $1.58 to $1.73 when using Apple’s guidance metrics.
Milunovich isn’t raising his iPhone estimate to 51.1 million units to take into account supply issues and channel inventory changes, also known as cushion to his estimate. Note that over the past three years Apple’s iPhone channel inventory has decreased by 300,000, 600,000 and 150,000 quarter to quarter, respectively, and each of those years had iPhone inventory between the targeted 4 to 6 weeks. This year iPhone inventory started the quarter at the low-end of Apple’s 5 to 7 week target so it seems unlikely that channel inventory should decrease very much if at all.
