Apple's Earnings Miss: Is it priced in? - Real Time Insight
October 22 2012 - 7:40AM
Zacks
The "tech wreck" of
earnings misses has been brutal, with IBM, GOOG, and MSFT all
making it tough to still love tech.
And AAPL hasn't even
reported, but enough institutional holders of the
stock have been selling to drive shares down to
some very compelling levels. I thought the selling would
continue this week, as many aggressive hedge fund bears are
likely targeting $600 to see who they can flush
out.
So it's nice to see the
stock up over 2% this morning, even though I was hoping for a
chance to buy more below $600.
But I also concluded last
week that the selling is getting very close to over-done and that
the "impending earnings miss" this Thursday is all but fully
priced-in.
How do I know they are
going to miss?
I don't, of course. But I
pay attention to price. And price (and volume of the institutional
variety) have been saying one thing:
analysts and investors
were getting more nervous about the quarterly results on
Thursday.
The consensus for this
FY12Q4 has been floating around the past two weeks just below $9,
with the latest read at $8.93.
And this is after the
company warned in July about this quarter coming in 25% below
Street expectations of over $10. The consensus went as
low $8.40 in July and has slowly worked its way back
up.
But not everybody is on
board, with the traditional AAPL bull Stifel Nicolaus
reaffirming their call for $8.01.
And here were some headline
updates last week on iPhone unit sales projections for
the quarter...
William Blair
reduced estimates from 33
million to 26.5 million units. And last Monday, their analyst
also brought his EPS estimate for the quarter down to
$8.39 from $9.17.
Gabelli &
Company lowered their iPhone sales
estimate from 32.1 million to 29.9m. Also last Monday, they took
the full-year EPS down from $46 to $44 (consensus is
$44.37).
Morgan Stanley
is at 25 million
units.
These are all houses
prepared to be underwhelmed by this Thursday's report and
they have probably been advising their private wealth and
hedge fund clients that "better buying opportunities" in AAPL would
soon be around the corner.
Wedbush
is at
only 24 million iPhones for the September quarter, saying that
they expect sales to be tempered by the supply/delivery
issues which many have cited in addition to potential quality
issues (Maps, aluminum scratches, etc).
But, they, along with
Barclays and Stifel, also expect a strong ramp in iPhone 5 sales
and new products (iPad Mini) into Fiscal Q1 (the December quarter,
since the quarter about to report is Apple's FQ4 for 2012). And
they reiterated their 12-month price target of
$885.
Barclays is at
$930. Their analysts speak of Apple's dominance of
"disruptive mobility" in tech continuing to power their earnings
growth.
Stifel
Nicolaus has been one of the
biggest Apple bulls on the Street, but they are preparing for a big
miss this week. Last week, as noted, they reaffirmed
their $8.01 estimate for the quarter. They did raise their iPhone
sale estimate from 22 million to 25 million, but they too remain
concerned about supply issues.
Now Stifel is above the
Street consensus for the December quarter at $16.50, but they just
brought this down from an overly optimistic $16.91, as they view
weaker Mac sales cannibalized by the new iPad
Mini.
More importantly, they
think Apple will guide the December quarter lower. And this has
caused the analysts to lower their 2013 full-year estimate from
$55.91 to $54.27, which is still above the consensus of
$53.72.
One last note about the
phone carriers: Verizon's numbers implied good things for iPhone 4
& 5 sales. Wells Fargo
analyst Maynard Um found them very encouraging. This week,
we get AT&T reporting on Wednesday the 24th and Sprint on the
same day as Apple, so we should get a lot more visibility. The
bottom could already be in by then I
imagine.
Bottom line: I think
the Apple miss is
almost priced-in.
What do you
think? What will an $8 report do?
And what will a $9
report do... send the stock racing
higher?
Finally, will tomorrow’s new product announcements make sure the
bottom is in at
$610?
APPLE INC (AAPL): Free Stock Analysis Report
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