Q2 Preview: Recent Data Hints at iPhone Miss; Will Apple (AAPL) Investors Flee?

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Apple (Nasdaq: AAPL) is trading lower Tuesday heading into its second-quarter report, which is expected out after the market closes. Tuesday afternoon finds Apple down about 2 percent. Apple is scheduled to report Q212 results after the close on Tuesday, April 24, 2012. Dial-in: 1-888-516-2377, there is no passcode.

The Street is currently looking for earnings of $10.06 per share with revenue of $36.81 billion. Numbers compare with EPS of $6.40 and revs reported in Q211 and EPS of $13.87 and revs of $46.33 billion last quarter. Notably, according to data at EPS Insider , Apple tends to best views by an average of 22 percent, with its only miss in the last six quarters coming with its October 2011 report (fiscal fourth-quarter 2011 for Apple).

The stock had a strong quarter, with shares moving just 48 percent to $599.55 at the end of March. The stock is down 6.7 percent since then, mostly on a recent four-session slide which saw Apple erase about $36 billion of market cap. Of course, if you've been following Apple, invested in Apple, or felt a icy pang grip in your gut late at night, like you're missing out on something important, you don't need to be told Apple rose 86 percent in 2011. Whoops.

Recently, U.S. wireless carriers Verizon ( VZ ) and AT&T ( T ) issued quarterly reports and updated on iPhone sales. For Apple, the iPhone is still a key device. Each one is subsidized roughly $440 by the carriers, meaning Apple's shipments of 37.04 million units last quarter was good enough for about $16 billion of top-line growth. Whether or not you feel using two sources to gauge overall iPhone sales is appropriate, given Verizon and AT&T account for something like 25 percent to 30 percent of overall sales, it's a good start.

So, AT&T said it activated 4.3 million iPhones last quarter. Last quarter, AT&T accounted for about 20.5 percent of Apple's iPhone shipments. Using the same metric for this quarter would amount to 21 million total iPhones shipped. Likewise, Verizon accounted for 11.4 percent of iPhone activations in Q411. Verzion's recent data has 3.2 million iPhone sales, leading to total Apple shipments of 28.2 million.

Both of those numbers are below the Street estimates calling for 30.5 million units.

Data from Bloomberg currently has 48 firms with a Buy on Apple stock, seven at Hold, and just one at Sell. The Street's price target average is $698, with targets up to $1001. Over the last 52-weeks, Apple has traded within a range of $310.50 to $644.00.

Analyst Comments

  • BTIG recently mulled AT&T being one of the first to start cutting subsidies for iPhone customers. According to the report: "The Apple customer on AT&T who has been upgrading their iPhone year after year at a fully subsidized price, can no longer do that. Here is some math. We estimate that 80% of iPhone sales at AT&T are upgrades to existing customers. In addition, AT&T only added 5 million new iPhone customers to its base in 2012 despite activating 17.5 million iPhones during the year." The recent AT&T iPhone activation numbers tell the same story.

  • Goldman Sachs sees EPS of $10.18 and revs of $36.9 billion, still saying the Apple's stock looks attractive at current levels and would be buyers ahead of results. The firm sees Mac sales slightly weaker, but investors will already be anticipating a slow down. On iPhone subsidies, Goldman sees the device as still being too great of a device for carriers to risk losing customer base on cutting pay-ins. Should the bigger players ebb subsidies, there will be smaller carriers waiting in the wings to grab the market share.

    Goldman sees iPhone shipments of 31.1 million, iPads of 12.5 million and gross margin widening 30 basis points to 43.5 percent.

  • JPMorgan sees EPS of $10.80 on revs of $39.07 billion. On sales, JPMorgan sees iPhones of 31.12 million iPads of 13.77 million, iPods of 7.41 million, and Macs of 4.54 million units.

    On the iPhone, JPMorgan commented: "While increasing penetration of new wireless carriers has been a major tailwind, we believe that the installed base also has become large enough to support a bigger replacement cycle. Looking ahead, our assumption is that a new iPhone 5 with a thinner body and LTE capability will be launched in 2H C2012, which should sustain the iPhone's above-peer growth trajectory."

    In addition, the firm sees a MacBook refresh happening over the next three-months, which will need incremental improvements in both features and specs.

  • Wedbush sees EPS of $9.34 on revs of $35.7 billion. Wedbush is modeling for iPhones of 27.78 million, iPods of 6.93 million, Macs of 4.27 million, and iPads of 12.73 million.

    Looking ahead for the iPhone, Wedbush thinks "that the iPhone 5 will likely be the biggest upgrade cycle yet, given LTE inclusion." On the iPad, the firm comments, "We are...encouraged by reported sighting of Wal-Mart's new store-within-a-store concept for Apple products at a store in Arkansas. This is also expected to be introduced at Sam's Club stores."

  • Gabelli is looking for revs of $39.04 billion, EPS of $10.12, and gross margin of 42.0 percent. Gabelli is modeling for Mac sales of 4.63 million units, iPads of 10.47 million, iPhones of 31.7 million and iPods of 7.47 million.

  • BGC Partners sees revs of $39.4 billion and EPS of $11.05. Shipments: iPhone at 33.5 million, iPad at 13.5 million, iPod and Macs at 6.7 million each. BGC did issue the following ominous statement: "We estimate that Apple needs to sell above 35 million phones in order to keep the stock on an upward momentum."

    On the iPad, BGC said, "It is possible that the launch of the new iPad created a vacuum in sales of the iPad2 product, putting upside to this estimate at risk. We also look for any impact to margins from sales of the new iPad."
Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Apple's past performance at Streetinsider's Apple's Income Statement .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks
Referenced Symbols: AAPL , T , VZ

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