Handicapping Apple’s earnings: Has a blow-out quarter already been baked in?

“Apple told Wall Street to expect total sales somewhere in the range of $63.5 to $66.5 billion — representing, at the midpoint, 15% growth from fiscal Q1 2014,” Philip Elmer-DeWitt reports for Fortune.

“Analysts aren’t buying it. They saw the lines for the new iPhones. They’ve seen IDC’s Mac numbers. They know iPad sales haven’t totally died. They watched Apple shift production to meet demand for the larger — and higher margin — iPhone 6 Plus,” P.E.D. reports. “They’re expecting a big quarter.”

“Investors are expecting a beat, and they’ve bid up the stock accordingly to within 6% of its all-time high,” P.E.D. reports. “Whether it goes up or down from there depends — at least in theory — on how big last quarter was and what kind of guidance Apple gives for the one that ends in March.”

Read more in the full article here.

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21 Comments

  1. Yeah, it’s “baked in” alright. Anything to keep AAPL down as much as possible.

    The world would be a far better place without so-called “analysts”.

    1. I’d have to agree. I’ll bet there will be a 2-5% selloff after the report also: “profit taking” as is usually the explanation. Then the second-guessing about the forthcoming quarter begins anew. Same ol’ same ol’…

      1. Stocks trade on expectations of future earnings, not past actuals. High sales of new iPhones have been reported by most sources over the past month, so yes, those expectations are already built into the stock.

        I expect some profit taking after the financials are announced, unless Apple reports availability is still not meeting demand, which would raise expectations for this quarter’s sales. However, I believe production is now meeting demand, based on some reports this past month.

        Apple Watch won’t impact these numbers, as it’s not expected to go on sale until later in this quarter.

        1. So you are saying it’s only about how well and how much you boast about what’s ahead???

          That would explain why the most corrupt companies do so well before they crash!!

        2. Expectations of future earnings is nothing but guessing about a company’s potential. It never has to pan out at all. There are no future guarantees as you see what happened to Samsung. What these investors are doing are simply deciding for themselves what stocks they want to go up or down based on some vague conjecture. It’s plain stupid and wrong of them to weight future value over current value because the future can’t be guaranteed.

          I understand that’s how the market might work, but it’s a crooked way of value companies for their own benefit. It’s like the case of Amazon. They keep claiming it’s going to be profitable in the future but it certainly hasn’t panned out for several years and there’s no guarantee it ever will. Apple has been earning and earning for years and they still believe Apple isn’t worth more than it is despite Apple blowing nearly every other company away. Wall Street is deliberately being obtuse.

      2. It’s my guess that if apple comes in at the high end of current expectations and has strong guidance, the stock will respond positively.

        And I believe the stock and guidance will both do that

      3. If intention is to sell for profit Why not sell right now ? Why wait for the earnings?
        I think the envirnoment is way too complex for any one entity to be able to control the outcome or predict the outcome …..

        One needs to look at the long term picture!
        I personally believe apple has a real exciting year ahead of itself !

      1. Since the demise of PED’s Apple 2.0, his reporting has not been so pro Apple, particularly his headlines. His compliments are now mostly backhanded. Anyone else notice this distinct shift in emphasis at the change over from Apple 2.0?

    2. Philip Elmer-DeWitt is one of the really, really good guys.

      You can count on him more than any other stock analyst IMO to give a fair, accurate and insightful picture of what’s going on.

      He NEVER does click bait, and is always worth reading.

      JMHO

  2. Look for sales NORTH of 73 million iPhones – Which will blow out even the highest estimates ….

    Apple will trade up some $25 into the $140 range after earnings …..

    So called experts are going to miss this one by at least 10%, on average ….

    Also looking for increase in dividend!

    1. Apple has made it clear that they intend to revisit financial stuff like the dividend and buybacks yearly, so don’t expect any change to the dividend until next time.

  3. It will be interesting to watch. The Watch. Hah. Everyone knows Apple did well, so there won’t be any upward movement at earnings. Probably down or flat, since the Watch remains an unknown quantity, and the release of the iPhone 6 and 6 Plus have sated the need for a larger form factor.

    I’d expect a lot of analysts to start predicting a pull-back, since there may not be a compelling (or predictable) upgrade package for the 6s or 6s Plus. The 6-series was the first revolutionary product release in the iPhone series, and a record number of people were willing to bite the cost bullet and upgrade. The iPad Air 2 was also a pretty compelling upgrade for anyone that didn’t already have an iPad Air, and its hard to see what they might do for its next release. You could easily make a case that next year’s iDevice holiday period could be a little softer, unless the Watch can take up the slack.

    It will be interesting to see if the 12-inch MacBook and the iPad Pro can generate much enthusiasm. And perhaps an Apple TV upgrade. And one more thing, maybe?

  4. It’s relatively easy to give reasons why Apple is overvalued unless you compare Apple with practically any other tech company around when it comes to revenue and profits. I’m fairly certain that Apple’s P/E is lower than many other tech companies that aren’t doing as well as Apple. If anyone can explain why Microsoft’s P/E continually remains higher than Apple’s P/E, I’d greatly appreciate it. It also doesn’t make much sense that Apple’s cash reserve has zero value. There are a lot of things that really don’t add up in Apple’s value.

    Baking in a share price makes no sense at all. I’ve seen plenty of companies’ share price run up before earnings and then investors find out they’re not even close to projected revenue and profits and then they drop like a stone. Apple isn’t trying to fool anyone. They give a projection and then they usually exceed it. If investors say Apple should be doing better then they’re just stupid. Investors don’t run companies. I’m not really concerned about greedy investors’ expectations as long as Apple is making plenty of money. I’ll get my dividend increases no matter what value Wall Street places on Apple. Wall Street is rigged against Apple and it’s seems fairly obvious.

    1. Microsoft and Amazon have models that Wall Street believes can go on indefinitely. Microsoft has an entrenched monopoly in business software licenses, and Amazon has a retail model selling other company’s stuff.

      Apple’s success is dependent upon their producing products repeatedly that delight their customers, and Wall Street doesn’t believe that model is sustainable. Hence, they value traditional companies that lock in their customers long term more. They think Apple’s customers will disappear overnight if they falter in producing great products.

      There’s no mystery here. Apple has to constantly work hard to continue their success. Microsoft and Amazon can skate their way down the road because their customers have no realistic alternatives.

  5. There is something new which might well positively affect Apple’s guidance for the next quarter.

    Apple is now selling huge numbers of iPhones in China and the Chinese New Year happens shortly. Just as the Christmas season boosts sales in Western Countries, there is a similar pattern around the Chinese New Year in China.

    Up until now, Chinese New Year hasn’t been a significant factor when it comes to Apple’s sales, but I think that from now on, it’s likely to move the needle appreciably for Apple.

    1. In the very few hours since writing that, I’ve become aware of a number of reports stating that iPhone sales in China are now exceeding iPhone sales in the US.

      That situation has been expected and Tim Cook has talked about it, but few expected it to happen quite so soon and it only reinforces my point about the effect of Chinese New Year on this coming quarter for Apple.

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