Adjusting AAPL's q112 iPhone units for 14 weeks brings them down from 37M to 34.4M in the prior year quarter for comparison purposes (13/14 * 37). If we just look at macro data, IDC says the smartphone market will grow 40% this past quarter. If true and AAPL maintained its market share, then, they should have sold 51.8M iPhones. However, both Kaptran and comScore suggest AAPL made significant market share gains since last year, especially in the U.S. market. Kaptran has U.S. market share up from 35.8% to 53.3% in the Sept. - Nov. 25 period. comScore has U.S. market share up from from 28.7% last November to 35% this November (a full month for both 4S last year and 5 this year). Market share in Europe was also up modestly and the iPhone 5 was launched in 101 countries this year, including China, whereas the iPhone 4s was only launched in 70 and not in Asia, except Japan.
Perhaps IDC is wrong about market growth and/or Kaptran and comScore are wrong about AAPL gaining market share, but if we just take the publicly available data at face value, it would suggest iPhone sales should be 51.8M plus whatever market share gains are assigned to it.
Other factors to consider are 1) the initial iPhone 5 launch was the end of last quarter, so the early bolus of sales were recognized last period whereas the 4S was launched late October 2011, yet the 5 has been available an entire quarter and the 4 probably sold little in the first 3 weeks of October last year awaiting the 4s launch, 2) China sold 2M iPhone 5s in their initial weekend and had 2 additional weeks of sales as well as whatever was realized in the additional 30 countries that the iPhone 4S didn't reach last year, and 3) WMT and Best Buy discounted iPhone 5's (at their own cost to drive foot traffic) while everyone was discounting 4 and 4S (presumably at AAPL's cost based on Cook call comments) to drive additional demand this holiday season.
All combined, it's just very difficult to see how they miss the 47M to 49M unit forecast of analysts this period.
Sentiment: Strong Buy
I come at it from a different angle.
1) AAPL gave guidance of $11.75 for the quarter
2) Apple has often blow away earnings so they clearly order more material than needed for that guidance..upside potential
Now add in information observed in the quarter
1) Wal-mart and apple discounted the iPhone and big iPad (I was shocked)
2) Apple cut orders from their supply chain (DB & others)
3) Iphone5 got off to a good start (5M)
4) Pre-orders in china looked good (2M)
The positives and negatives of the in quarter information appear to me to cancel out. So with that, I'm gonna assume their EPS guidance is probably the closest to the truth. At $11.75 per share, to me that's a $560 stock (12x). I'm not long or short but on the sidelines because the risk IMHO is too high of a negative surprise (actual iPhone numbers in the mid 40's, iPad mini taking too many below the line dollars from the iPad total). If their EPS drops below $11.75, it could be a mid 400 stock.
disclosure: I own iphones, ipads, macbooks, imacs....love their stuff
Interesting (not really), do you apply the same analysis to Amazon? So if Apple misses a little it goes to $400 but Amazon is sitting with a PE of what....over 3000 lol, (look it up). This is my point, the market is stupid. It applies very rigid numbers to a company that's killing it and all loosy goosey for a company that is barely making money.
I would rather pay $1000 for an Apple then $100 for Amazon.
Sentiment: Strong Buy
Best Buy was complaining that Walmart did not have an inventory of phones. So clearly was not an attempt to sell excess inventory.
Orders were cut last year as well and Apple had a great quarter.
iPhone 5 start was in last quarter.
China sales seem good.
Not sure the bad outweigh the goods.
Here is a piece I wrote a little while ago:
The US market typically represents between 30-40% of iPhone sales. In last years FQ1 report, US sales were about 37% of the 37 Million iPhones sold (ATT sold 7.6M, VZ sold about 4.3M, and Sprint about 2M) for a total of about 13.9M iPhones sold domestically. It is very important to remember two things for comparison purposes: 1) The iPhone 4S was released two weeks AFTER the quarter started and 2) The iPhone 4S rollout was much slower (China didn’t even start selling it until the next quarter). The first point means domestic sales might have been more brisk for the 4S because opening weekend/week was included, but also less sales because of the 2 less weeks.
Another huge point of consideration is that Apple share of US smartphone sales last year in the same quarter was 35% vs this year 53% (and likely higher than this) according to a recent report. So we know for sure that domestic sales of the iPhone will surely come in higher than last year, if not much higher. If we assume flat total smartphone sales year over year (just to be extra conservative), we take 13.9M iPhones and divide by 0.35 for a total of 39.7M total smartphone sales in the US last year in the 4th quarter. Now, iOS has a 53% share of smartphone sales in the US so we multiply 39.7 x 53% to get 21 Million iPhones sold for the 4th quarter in the US.
Ignoring the fact that the iPhone 5 rolled out much quicker than the 4S internationally, we can use the same US/international ratio of iPhone sales as last year (~37%) to get a good estimate of total iPhone sales for the quarter. 21 Million / 0.37 = 56.75 Million iPhones sold for the quarter. So we can be fairly comfortable with this number, given the conservative approach I’ve taken to calculate this figure.
Couple this with a number like 27 Million total iPads sold, and we can be comfortable with an EPS coming in at least $15 (with plenty of upside possible).
Sentiment: Strong Buy
I did the same calculation but what troubles me is the US market share last year and this year. AT&T was 80 percent IPhone Verizon was 50 percent and I don't recall sprint, but the total market share US in smartphones last year must have been gater than 50 percent? There are some smaller carrier, but can you reconcile the numbers?
Your unit amount looks correct, even with the Iphone 5`s included. They will have great numbers, but heres the issue. Even in that same story you put up it states their next quarter wont do near as good. When a report comes out there not going to pump up a stock when forward quarterly outlook is worse.
You are right. I was working on two models. And, the one that ignores the 14 v. 13 weeks is the 51.8M base without market share gains nor any other factors. Here is the logic for ignoring it, however. The q1 sales in both cases involve the launch of a new iPhone model as well as Christmas. The majority of sales likely occur during the early phase of the launch and leading into Christmas, as people hold off purchases awaiting the launches. And, in 2011, there were likely few sales the 3 weeks leading up to the October 21 launch of the 4S. As such, the 14th week probably meant little to revenue in q111 and somewhere between 48.2 and 51.8 is a fair baseline.
Sentiment: Strong Buy
The issue is that most of the growth is coming from Asia. AT&T sold 6.4 million smartphones vs 6 million in the October and Novemnber period vs last year. Only very modest growth of less than 10 percent. Now the iphone launch is in last years numbers so perhaps the real growth is more like 20 percent? tThe US is where apple has the highest share and the US will be lucky to grow 20 percent in smartphones. The wild cad is China both before and after the launch. Any insights?
Those are outstanding comments on the likely iPhone sales for the Q... further, we think they will sell more i4s this Q than they did last Q.
Yes phone sales matter; so will the pad sales and so will the gross margin -- we expect all of those to surprise to the upside.
There are many things that have tortured these shares, but beyond ongoing superb management execution, the one thing Cook must fix is to ensure the street understands the roll forward guidance sandbagging of the past either is or is not going to persist... it is a truism that they have F up the last two Q by failing to smash not only guidance but also the consensus estimates -- because that has been the pattern for several years prior to the last two q...
All of that is most unfortunate, bur a huge part of the fault lay at the sellsiders' feet, too. Guys like Gene Munster and Shaw Wu, excellent, super bright analysts who actually do work along the lines of yours above, need to teach Cook what AAPL's lame investor relations and even CFO have not about why it is critical to ensure the street understands what mgmt is actually thinking re the guide vs consensus and vs smahing both (or NOT). Cook needs to get this right from now on to avoid having the entire street and the buyside and all the #$%$ shorting the story be able/required/forced to begin their first paragraphs of updates by writing, "Well the Q was okay, but they badly missed the consensus." Such fail makes all the sellsiders and BUYSIDERS afraid of management's lack of control over the IR process... a non-workable credibility issue for the valuation.
Given the carnage of late, we can hope Tim and many PM in addition to us have shared this perspective with mgmt. Longs can also hope AAPL has ambitiously repurchased shares and will re-up the authorization with force near term... and while they are smelling some coffee on capital planning and despite missing the huge opportunity to crank a special div in December, they really ought to come with that tied tightly to the earnings call. A $30 special dividend is comfortable for them given free cash flow and domestic liquidity, and it would send a message/warning shot straight between the eyes of the tools like Grundlach and kass mgmt is letting punish the stock with impunity -- at least until the heavy institutional money decides it is safe enough to pull the hedge shorts and resume the run higher here.
As ambitious buyers on this latest redip to below $530, we are amazed to see the negative sentiment directed at the shares... but perhaps on the guidance vs consensus piece alone and the missed consensus two Q in a row, the BOD and Cook have earned it for their shareholders. It seems in the distant past when sentiment was frighteningly bullish (everyone loved the story at $705 going to $1111), but that was only 3 weeks ago! The intensely negative sentiment bias seen since then is very encouraging for us -- we think the sustained reversal will be VIOLENT AND RAPID... and start any day now.
Figure it out already Tim!