First determine projections for iPads, Macs, Watch and Other revenue
While iPhones account for about 67% of Apple’s total revenue the first step is to estimate the revenue from all of the other segments.
iPad Pros will help but not by a huge amount
I am expecting Apple to have sold 10.4 million iPads in the September quarter and for that to increase to 17 million in the December quarter, up 63% quarter to quarter or 6.6 million units. For the previous two years iPad units quarter to quarter growth has been 85% (or 12 million units in 2013) and 74% (9.1 million units in 2014).
I am forecasting iPads Average Selling Price (ASP) to be $430, which would be an increase of 2.5% year over year. iPads would then generate revenue of $7.3 billion and decrease 19% year over year.
Macs should continue their sold growth
I am projecting that Apple sold 5.9 million Macs in the September quarter, up 7% year over year, and for them to remain relatively flat at 6.0 million in the December quarter. This would be a 9% increase year over year which would be similar to March’s 10% increase and June’s 9%. With an ASP of $1,250 Mac revenue would be $7.5 billion, growing 8% year over year, and slightly more than the iPad’s revenue.
Services should continue its double-digit growth
Apple’s iTunes, Apple Care, Apple Pay, licensing and services generated just over $5 billion in revenue for the first time in the June quarter and should continue to grow by about $200 million in the September quarter and then another $200 million in the December quarter. Unless Apple Pay takes off dramatically in the short-term that would put it at $5.5 billion, up 14% year over year, at the end of calendar 2015.
Watches are the swing factor in the holiday quarter
Other products (iPods, Apple TV, Beats, Accessories and the Watch) is the smallest revenue line item Apple has but with this being the first holiday season for the Watch it could surprise to the upside. After an estimated 2.4 million Watches being sold in the June quarter and 3.5 million in the September quarter I am projecting that the company will sell or at least use internally for its guidance forecast 5.5 million Watches. With an ASP of $475 and $1.85 billion in the other revenue the total revenue for Other products is $4.5 billion.
This makes my revenue estimate for all the line items excluding the iPhone to be $24.8 billion, which would be a 5.6% increase year over year.
How many iPhones are needed to get to the Street’s revenue estimate
Now that we have revenue assumptions for everything else to get to the $77 billion Street estimate, which is up only 3% year over year, we can determine how many iPhones need to be sold. This doesn’t seem too hard since revenue should have grown by over 20% for each quarter in fiscal 2015 but Apple has a very tough compare in the December quarter and may decide to be a bit on the conservative side.
iPhones will have to generate $52.3 billion in revenue in the December quarter which is $1 billion higher than a year ago or 2%. I am assuming that the iPhone’s ASP will drop from $687 in the December 2014 quarter to $670 in this year’s December quarter. This means that Apple will need to sell 78 million iPhones in the quarter, which is 5% higher than last year. Note that if Apple gives revenue guidance that shows no growth from last year that translates to iPhone unit sales showing a decline of just under 1%.
iPhone unit growth of 5% isn’t too unreasonable a forecast since the iPhone 6s and 6s Plus will have been available in China for the full quarter and China Mobile is experiencing very strong 4G user growth. Another indication of strong iPhone 6s demand is Gazelle and others experiencing very strong iPhone trade-in business.
The stock should move up if Apple forecasts 5% iPhone unit growth
While Apple won’t give product guidance it isn’t too hard to determine what each segment has to do to hit the company’s revenue guidance. Since the major thesis of Apple’s bears is that iPhone growth will flat-line and potentially drop this would help to undercut their opinion and play into the Bulls camp including Steve Milunovich at UBS and Katy Huberty at
Even if Apple’s revenue guidance is a bit short ($1 to $2 billion) of the Street’s $77 billion estimate given the company’s history of beating guidance I would expect the stock to react positively. If the guidance is $4 billion or more below the Street’s forecast this would probably put pressure on the shares.
