Business as usual: Analyst expects Apple to guide conservatively for upcoming quarter

“Apple has a well-established pattern of low-balling its financial guidance – and BMO Capital’s Keith Bachman thinks we will see more of the same when it comes to the September quarter,” Eric Savitz blogs for Barron’s.

Savitz continues, “In a research note this morning, Bachman takes a look at the direction Apple is likely to provide on September quarter numbers. He notes that in the past the company has guided to 3%-5% sequential revenue growth in the September quarter, which he notes would suggest revenue of $7.7 billion to $7.75 billion, versus the current consensus of $8.27 billion. He notes that iPhone sales in the quarter should jump to north of 4 million from around 700,000 in the June quarter, but that most of the revenue is deferred, given the company’s policy of recognizing revenue from the phone over a two-year period. Bachman thinks Apple could guide EPS for the quarter to $1 a share, versus the Street consensus of $1.24.”

“Bachman also notes that Apple also tends to beat its guidance; he notes that while September quarter guidance has generally called for growth of about 5%, the actual growth has tended to be more like 10%, which would suggest revenue of $8.1 billion the quarter (assuming $7.35 billion in the June quarter) with EPS of $1.21, closer to the Street’s current view. I would also point out that Bachman is no bear on the stock; he has an Outperform rating and $205 price target,” Savitz reports.

Full article, in which Savitz also reports what his boy Toni Sacconaghi (Eric must have pulled him in off the ledge) thinks about Apple, as if his thoughts have any value at all, here.

MacDailyNews Note: Apple will to conduct a conference call to discuss financial results of its third fiscal quarter on Monday, July 21, 2008 at 2pm PDT/5pm EDT. A link to the conference call webcast will be here. Analysts consensus estimates for Apple’s Q3 08 call for $1.08 EPS, on revenue of $7.35 billion, or 35.9% YOY sales growth. Peter Oppenheimer, Apple’s CFO, has provided guidance of “about $7.2 billion and earnings per diluted share of about $1.00.”

7 Comments

  1. Deferred revenue applies to the iPhones before July, but Apple can’t defer revenue when it has already received the full price for its new model.

    Up to the end of the June quarter the iPhone revenue is recorded at 1/24 th per month; after that each new model’s revenue has to reflect actual sales.

  2. I think they can hairytales. They are doing it for the TV already.

    Apple will account for the revenue over 2 years, but will not receive ongoing income from phone subscriptions of course.

  3. “Apple has a well-established pattern of low-balling its financial guidance – and BMO Capital’s Keith Bachman thinks we will see more of the same when it comes to the September quarter,” Eric Savitz blogs for Barron’s.”

    Wow! What a revelation! Are these guys on the ball or what!!

    Betcha a bunch of these analyst turds still come off as flummoxed when the numbers are released!

  4. hairytales: Deferred revenue applies to the iPhones before July, but Apple can’t defer revenue when it has already received the full price for its new model.

    Yes, they can. All they need to do is to record only a portion of the whole revenue for the relevant fiscal quarter and leave the rest in the bank for the next fiscal quarters. The first gen iPhone was also sold at full price up front. The difference is the 1st gen iPhone was sold at full price to the consumers and iPhone 3G is sold at full price to carriers that then subsidize them for the consumers.

  5. I think Apple will have 3Q guidance of $7.6B and $1.18 eps.

    Last quarter, Oppenheimer did not guide conservatively. As MDN notes, Peter stated, “about one dollar”.

    In response to an analyst, he said, something along the lines of “you have the revenues, you have the margins, you do the math”. Since he guided Revenues to be $7.2B, which was 96% of Q1 revs. And, Gross Margin guidance was almost exactly the same as Q1, 33% vs 32.9%.

    Then we can take Oppenheimer’s advice and calculate that his EXACT guidance is 96% of Q1 actual earnings, which comes out to $1.11 eps. In other words, Oppenheimer guided ABOVE the analysts’ expectations, though they are too dumb to realize it.

    Go listen to the last conference call, if you don’t believe me.

    You can read my full post-conference call analysis in the Opinion section here at MDN for the actual quotes, and links.

  6. Deferring reveue is a must. Generally Accepted Accounting Principals will dictate that they defer some revenue. It allows them to issue updated features/software without a charge or getting in trouble with fed lawyers.

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