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.