Apple reports its September quarter earnings on Tuesday evening!
The stock is down for the year but rose in recent months. Here is what analysts are expecting, the numbers the company will be hoping to beat:
- Revenue: $47 billion
- EPS: $1.65
- iPhone units sold: 45 million for the last quarter (expectations of 75 million in the upcoming December quarter).
It will be another slightly humbling call for CEO Tim Cook if, as expected, he reports another year-on-year decline in iPhone sales. In the period last year, Apple sold 48 million iPhones.
But Apple goes into the call with two positive headwinds: The collapse of Samsung’s recalled Galaxy Note 7 may have switched 1 million or more customers to iPhone 7, analysts say. And there was an extra week in the quarter which will juice the numbers a bit too.
Also, as we noted yesterday, investors are already focused on fiscal 2017 in which they expect big things from next year’s new “iPhone 10” which is expected to be a much bigger update to the platform than iPhone 7 was.
Here is what analysts said this morning:
Piper Jaffray (bullish) – Gene Munster and Douglas J. Clinton:
“The second and slightly larger group of investors believe the tail of the iPhone 7 is irrelevant, and is betting that the iPhone 10th Anniversary will yield a jump in growth from flat to up ~15%.”
“Sep-16 iPhone Units: Expect 44-46 million vs the buy side at 45 million .”
Macquarie (bullish) – Ben Schachter:
“Services at Apple remain the most underappreciated aspect of the Apple story.”
“… For FY 2017 we expect AAPL services will net $27.6B for 11% of total revenue, but contribute 25% of gross profit. On gross revenue terms, AAPL’s services business could be its own Fortune 100 Company, and we expect services will gross $61.3B in 2017, growing to $105.7B by 2020.”
Deutsche Bank (bearish) – Sherri Scribner et al:
“Given increased build plans at Asian suppliers and a boost from short-lived U.S. carrier promotions, we are raising our iPhone estimates to 46M in C3Q and 75M in C4Q. While we expect some upside to results versus management’s original guidance, we believe investor expectations have already moved higher and are reflecting a beat and potential raise.”
“Expects: 46 million iPhones sold in September quarter, with “strong demand in US with carriers reporting increase interest.
“Remain cautious long term: While we expect some initial upside to iPhone numbers, and expect shares to be supported by positive iPhone comments into year-end, we remain cautious on the shares long term, given the fundamentals of the Apple’s main market. We see slower smartphone sales, lack of growth at the high end, limited market share penetration in emerging markets, and elongating smartphone refresh cycles as key inhibitors to Apple’s growth longer term.”
JP Morgan (bullish) – Rod Hall et al:
“We are expecting Apple to guide to 4% below consensus revenue for FQ1 as smartphone demand remains weak globally, with the weakness more pronounced in the $400+ category. We are, however, increasing our iPhone estimates for the December quarter by 3m to account for possible help from the discontinuation of the Samsung GN7.”
BAML (bullish) – Wamsi Mohan et al:
“We currently model 45mn iPhones for the Sep quarter and 81mn iPhones for the Dec quarter.” That’s a 7% decline. BAML is expecting 81 million phones sold in the December quarter, a 3% decline. BAML believes Apple added 1m units sold from former Samsung Note 7 customers.
“For the Dec quarter, our iPhone estimates are baking in an assumption of 3% Y/Y decline in the base business, which is less than the decline in the Sep quarter. The Dec quarter will get the full benefit of iPhone 7/7+ launch.”
Pacific Crest (bullish) – Andy Hargreaves et al:
“PCS estimates FQ4 iPhone units of 44 million and FQ1 iPhone units of 73 million.”
UBS (bullish) – Steven Milunovich, and Benjamin Wilson:
The UBS team published a lengthy note discussing Prof. Clayton Christensen’s “the job to be done” theory of how new products are developed and sold, which they refer to as “Jobs Theory” (as distinct from Jobs the founder):
“Jobs Theory prioritizes the user experience over product attributes. Successfully serving a consumer’s complete need and creating internal processes and measurements supporting jobs thinking is almost impossible for competitors to copy. If Apple succeeds, it will be by correctly understanding jobs. However, Apple recently seems to be struggling with Apple Watch and Apple Pay to identify new jobs.”
“Led by Jony Ive, the Industrial Design team of about 15 engineers is considered the power center of Apple. This team needs to do more than rough out product specs—it must decide what customer needs to attempt to satisfy with state-of-the- art technology. No doubt there is significant input from marketing and other parts of the company. This perhaps is where Steve Jobs’ insight is most missed: identifying a job to be done then fulfilling it in a way making the tech close to invisible.”
Wells Fargo (neutral) – Maynard Um et al:
“iPhone units should be strong driven by 1) 20+ carrier adds in the quarter, 2) aggressive iPhone launch in 28 countries vs 12 in 2015, and 3) heavy promotional activity by some carriers (as large number of subs are coming off two year contract). While this may cause some pull-in of demand from the December quarter, the extra week in December and supply constraints in the September quarter, in our opinion, mitigates risk to the December quarter. However, we think there is risk of demand pull-in from the March quarter.”
- iPhone sales/units/ASP of $28.4B/43.4MM/$655
RBC (bullish) – Amit Daryanani et al:
RBC predicts 44.2 million iPhones sold in the September quarter and 79 million phones sold in the December quarter.
UBS (bullish) – Jinjin Wang, Asia Telecom analyst:
Wang predicts weakened growth in China. iPhone 7 demand is below 6s, according to distributors.
“(1) high-end smartphone penetration is 80-90%, and (2) domestic brands are catching up as Apple’s innovation has lagged—consumers are now not embarrassed to own Oppo, Vivo, or Huawei handsets. Apple this year is number five or six among the top 20 sellers.”
“Domestic brands like Huawei, Oppo, and Vivo have been big winners against foreign brands like Apple and Samsung. The top ten handset brands in China today include only two foreign brand names, Samsung and Apple, with all others on the list domestic brands.
“… Typically a Chinese consumer buys Apple to ‘pretend to be something,’ because it’s a very high-end brand. Starting last year and continuing this year, it’s been the opposite. Consumers are looking at domestic brands like Huawei, Vivo, and Oppo as also being very high quality brands. They can buy similar functionality as iPhone at only 2-3k RMB, half of Apple. It’s more value for the money.”
Cowen (bullish) – Timothy Arcuri et al:
Expecting 46 million phones sold in September quarter.
“Despite tightly managing supply through the Q, AAPL should still be able to beat and guide at least in-line if not a touch better. iPhone 7 is proving an effective ‘bridge’ to the iPhone 10 super-cycle in ’17, where a powder keg of a dramatically aging installed base lurks just under the surface such that C17 Street revs/EPS are 10%+ too low. Raise target to $135, which even still seems too low.”
Raymond James (bullish) – Tavis C. McCourt and Mike Koban:
Expecting 45 million phones sold in September quarter.
“On Thursday morning, Verizon reported its 3Q16 earnings with modestly positive indicators from the smartphone activations data. Overall, we estimate smartphone activations were down 3% y/y, as compared to down 17% last quarter and displaying the best trend seen since 3Q15.”
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