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AAPL Stock: 112.48 ( + 0.7 )

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AmTech: AAPL investors mays be unforgiving with Q3

updated 10:20 am EDT, Thu July 17, 2008

AmTech on AAPL Q3

Investors in Apple stock may not be forgiving after the results of the company's third financial quarter, says Shaw Wu of American Technology Research. Gross margin is said to be the "key metric to watch" with Apple performance, but despite positive signs for the previous quarter, gross margins did not end up growing significantly. Investors are said to have given Apple stock a "free pass" at the time, but due to the fragile US economy, they may not appreciate smaller margins (and thus smaller EPS) in Q3.

Wu is predicting an EPS of $1.10 for the quarter, off revenue of $7.3 billion. This is still above Apple's traditionally conservative guidance though, which points to $1 EPS and $7.2 billion in revenue, and even the consensus, which has $1.07 EPS and $7.3 billion in revenue. Wu says he is worried about reports of a slowdown in Mac production, but "comfortable" in holding to a prediction of 2.8 million computers.

The next quarter is expected to be buoyed by heavy iPhone shipments, and produce $8.4 billion in revenue and $1.30 EPS, versus the consensus $8.3 billion and $1.24 EPS. AmTech's stock target is $220, based on 32.5x of a CY09 EPS of $6.81, or 30x net of cash and interest income.




by MacNN Staff

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Comments

  1. Guest

    Joined: Dec 1969

    +1

    One More Time . . .

    And here we go again. Shaw Wu attempting to influence AAPL investors with his negative spin. The SEC is looking into this kind of behavior, Mr. Wu. You can tell us what YOU think, but don't try to tell US what to think. Gawd, but I hate analysts like this guy. They're more market manipulators than anything else.

  1. Constable Odo

    Joined: Dec 1969

    +4

    Apple's stock is done for

    as far as Wall Street is concerned. It doesn't matter how many iPhones or computers are sold, the stock is just too easily manipulated and the average investor has no faith in Apple's lowballing of guidance. I'd heard some rumor that even Apple itself tries to keep the stock low because Apple company executives can make money that way.

    Yes, Apple's production will slow down, but they'd still be making more money than any other comparable tech company. So this may be another year that we will not see Apple's stock reach $200. What's sad is that there are people that keep showing all these irrefutable numbers of why Apple's stock should be at around $225, but basically the stock only trades sideways. Up one day, down the next in a small range regardless of product sales or demand. I agree I can't see into the future, but this is how it appears to me and I'm being called a doomsayer for my observation. Reportedly as Apple continues to rake in profits, the stock continues to stagnate.

  1. ZinkDifferent

    Joined: Dec 1969

    0

    What's that...?


    "The sky is falling...!"

    Oh, right, as usual...

  1. shadowself

    Joined: Dec 1969

    +2

    It appears as though

    the big investors are looking for something irrefutably and truly amazing to come out of Apple before they start buying and driving the stock up. IF the iPhone launch had gone off without a hitch and they had sold 2 million iPhones the first weekend and they had stock in every store without any interruption and they were on track to have sold 4 million iPhones in the first month, THEN the big investors would be buying in. Assuming Apple can get its production ramped up it may actually sell 10 million iPhone G3s between last 11 July and the end of the year.


    The early iMac period was a significant turn around for Apple. The early OSX era brought Apple from a backward OS to a modern, stable system. The early iPod/iTunes era was a major revenue and consumer electronics expansion for Apple. So far investors don't think they've seen the same or better response to the iPhone (they have, they just don't get it yet).


    Current and potential investors in Apple have become jaded with success since the dark days of the mid 90s. They expect miracles at every turn or they won't buy stock.

  1. LouZer

    Joined: Dec 1969

    +3

    Re: It appears

    Yes, they are looking for something amazing, because, as a stock price goes, Apple's is currently priced to expect something amazing.

    They are currently priced at 35 times earnings. Which means people expect growth. If they aren't going to see the growth, the stock isn't going to hold that price.


    But none of that matters, apparently. If anyone downgrades (which he didn't by the way) or issues an analysis that isn't saying $225/share (which he did last week, did he not?), its always just thrown out as someone trying to push the stock price down. Apparently the only way to be considered a 'qualified' analysts on MacNN is to say Apple is going to keep going up, up, up.

  1. LouZer

    Joined: Dec 1969

    +3

    oh

    And what's wrong with Apple's gross margins? Isn't 30% enough for investors? They actually want Apple to squeeze even more money out of us or something?

  1. manleycreative

    Joined: Dec 1969

    +1

    lol report

    "mays be"? I can't believe the journalistic integrity of MacNN isn't being called out on this one.

    Mays be they can haz cheezburger too?

  1. macbones

    Joined: Dec 1969

    -2

    growth

    "They are currently priced at 35 times earnings. Which means people expect growth."


    hmmm. Apple sells in a weekend what it took 76 days to sell last year (iPhone). I would consider that pretty good growth.

  1. Guest

    Joined: Dec 1969

    +2

    Re: It appears

    "They are currently priced at 35 times earnings. Which means people expect growth. If they aren't going to see the growth, the stock isn't going to hold that price."

    While I basically agree with you, I think that using earnings multiples is a poor metric for a company that is deferring substantial revenues (as Apple is doing with the iPhone).

    I have been wondering for some time if Apple's decision to use subscription accounting was largely designed to reduce volatility in their top line. Sure, there will be no blowout quarters but even weak quarters will see their revenues propped up. If so, then I expect Apple to transition more (and eventually, all) their major hardware products to a subscription accounting method.

  1. DRBOBM4

    Joined: Dec 1969

    +1

    P/E

    The current P/E average for technology stocks is 31.5. Givens Apple's profit margins and their potential growth in PC's and phones, 35 seems very reasonable. If this market were rational, it seems that a higher P/E would be justified. Personally, If I were Mr. Wu, I would be concerned about the SEC investigations. Then on the other hand, Blodgett seems to be still making a living, so maybe he has nothing to worry about.

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