Bullish Cross is readjusting its outlook on Apple to a view that is more commensurate with the increasingly bleak economic environment. As unemployment continues to rise and discretionary income contracts, Apple will undoubtedly struggle to keep up its explosive growth in 2009. The current consensus estimates for 2009 have Apple earning $5.15 in EPS on revenue of $35.14 billion. While the current research data is less than favorable, the consensus is still overly pessimistic on the current period. GAAP-Based Est. Non-GAAP Est. Difference Revenue $8,318 $8,798 $480 (5.7%) Cost of Goods Sold $5,490 $5,455 -$35 (0.06%) Gross Margin $2,828 $3,343 $515 (18.2%) Operating Expenses $1,370 $1,370 - Operating Income $1,458 $1,973 $515 (35.3%) OI&E $85 $85 - Net, Before Taxes $1,543 $2,058 $515 (33.4%) Taxes $463 $618 $155 (33.5%) Net Income $1,080 $1,440 $360 (33.3%) Earnings Per Share $1.19 $1.59 $0.40 (33.6%) Diluted Shares 905,000,000 905,000,000 -
However, given the relatively high lack of transparency with regard to iPhone and Macintosh sales going forward, Bullish Cross holds an increasingly cautious view with regard to Apple's fundamentals and earnings estimates in 2009. Bullish Cross now expect Apple to earn about $5.78 in EPS on $36.591 billion in revenue down from $6.63 in EPS on $41.196 billion in revenue. This reduction in estimates is due in large part to Apple's intentionally making it more difficult if not impossible to track iPhone sales using IMEI data. However, if the third generation iPhone is well received by the consumer this summer or if the economic climate becomes substantially more improved in the latter half of 2009, there is ample room for Apple to handedly beat these estimates.
For fiscal Q2 2009, I expect Apple to earn about $1.19 in EPS on $8.318 billion in revenue on a GAAP basis versus the consensus of $1.09 in EPS on $7.94 billion in revenue. The consensus estimates for Q2 are far more fairly stated than they've been in previous quarters. On a non-GAAP basis, I expect Apple to earn $1.59 in EPS on $8.798 billion in revenue. One can interpret the recent research data as indicating that Apple could sell about 10.5 million iPods, 2.45 million Macs and about 3 million iPhones.
Andy Zaky's Earnings Estimates for Q2 2009 (in Millions, except for per share data)
Revenue Breakdown by Product Summary for Q2 2009
Product | Unit Sales | ASP | GAAP Revenue | Non-GAAP Revenue |
iPods | 10,500,000 | $145.00 | $1.523 Billion | $1.523 Billion |
Macintosh Computers | 2,450,000 | $1400.00 | $3.43 Billion | $3.43 Billion |
iPhone Sales | 3,000,000 | $660.00 | $1.500 Billion | $1.980 Billion |
iTunes | - | - | $920 Million | $920 Million |
Software | - | - | $575 Million | $575 Million |
Peripherals | - | - | $370 Million | $370 Million |
Total Revenue | - | - | $8.318 Billion | $8.798 Billion |
Andy Zaky's GAAP-Based Earnings Estimates for FY 2009 (in Millions) Q1 2009 Q2 2009 Q3 2009 Q4 2009 FYE 2009 Revenue $10,167 $8,318 $8,728 $9,378 $36,591 Cost of Goods Sold $6,635 $5,490 $5,760 $6,114 $23,999 Gross Margin $3,532 $2,828 $2,968 $3,264 $12,592 Operating Expenses $1,406 $1,370 $1,410 $1,510 $5,696 Operating Income $2,126 $1,458 $1,558 $1,754 $6,896 OI&E $158 $85 $100 $180 $523 Net, Before Taxes $2,284 $1,543 $1,658 $1,934 $7,419 Taxes $679 $463 $490 $561 $2,193 Net Income $1,605 $1,080 $1,168 $1,373 $5,226 Earnings Per Share $1.78 $1.19 $1.29 $1.52 $5.78 Diluted Shares 901 905 905 905 904
No Position in Apple.
9 comments:
I guess the big news on your article is your disclosure.
You sold your position on Apple ? I though you were a long term investor and if it's the case then you should keep your Apple Stock.
2009 is a tough year (like 2008) in term of consumer spending. But Apple has so much room to grow in each business unit :
- Macs : They are leaders in the student segment. If you take into account the very low conversion from MAC to PC, there is a high probability that the market share of apple will grow along with the student that will get older.
- Ipods : There is a saturation in all Ipod Section except the Touch. The Ipod Touch has a big growth potential thanks to the App Store. We can almost separate the Touch from the Ipods business Unit.
- The Iphone : The long term potential of the Iphone is tremendous due to the same reason as the Ipod.
- Others potential product : If you look at the new potential of OS 3.0 you realize that Apple can create a new set of product build with OS 3.0 that is a full operating system.
So i don't know what Apple will do this quarter, i have to say that i don't really care because i clearly believe that the long term growth of this company is greater then the market expects (knowing that the market only look on a 3month basis...)
Therefore i don't see any reason to sell any position on the stock. I would more advice to increase position if there is a drop due to earning or whatever news (including Jobs potential departure).
Well, I'm shocked at the brevity of this post. With the IMEI being confusing are you saying you have no more insight than anyone else into the numbers? I was hoping for another 'stick it to the pros' bravado filled post.
No positions ?
Do you mean: HALTED ?
No more 6/7$ EPS ?
You were so sure 3, 6, 9 months ago.
TSK, TSK, TSK
You are wrong anyway. AAPL will do 6$ at minimun.
Andy, how do you justify your prediction of 2,450,000 Macs sold in Q2? By my calculations, that's an increase of 7% over last year's Q2. Everyone else is predicting a drop in sales (some predict a drop of over 10%).
Andy. I have thoroughly enjoyed reading your research. I am sorry that you are no longer long AAPL. But this economy challenges the best of us. The one area of your research that I think needs more focus is software -- iTunes Music Store, the AppStore, and AAPL's various software offering like iLife and iWorks. There was a 30% price increase at iTunes last quarter. Because of software, I think that AAPL's earnings will greatly exceed your estimates. But, we will know very soon. Either way, your work is brilliant. Keep it up. Steve
Andy, What figures did you use to come out with $85 million in OI&E? I know treasury rates have came down and apple made 2.37% on their cash/equivs last quarter. I used apples cash of $6.820 billion and subtracted $500 million for the one time upfront payment to LG for LCD screens coming out with $6.320 billion and I applied a 2.2% rate to that and used $139 million for OI&E. Did you use 1.35% return rate?
fatalbert said...
Andy, What figures did you use to come out with $85 million in OI&E? I know treasury rates have came down and apple made 2.37% on their cash/equivs last quarter. I used apples cash of $6.820 billion and subtracted $500 million for the one time upfront payment to LG for LCD screens coming out with $6.320 billion and I applied a 2.2% rate to that and used $139 million for OI&E. Did you use 1.35% return rate?"
Go question. Go back and look at Apple's guidance on the issue. I was vexed myself.
An Apple booster who also understands when it's time to take profit. Well done.
I don't understand why on such an important equation into apple's balance sheet it is so unclear how to figure that number and try to forecast their weighted average yield. I know for a fact when revenue from foreign markets are exchanged over to US Dollar it is at the prevailing rate as of the end of the previous month (e.g. January revenue was translated at the 12/27/08 rate; February revenue was translated at the 1/31/09 rate). I do not know if this holds true for all balance sheet items like Cash/Treasury rates. I do agree with you on the fact that trying to estimate forward earnings for apple is very frustrating as their balance sheet and accounting is kept with limited clarity to the average stock holder. If you look at other companies balance sheets a child could read them. I do believe 1/3rd of apple stock price has disappeared for this very reason.
I think apple will have about the same gross margin as Q1 due to low component pricing and weakening dollar. Thanks for the article and start looking at some of those Jan '11 LEAPS.
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