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AAPL Stock: 102.47 ( + 2.71 )

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Analyst: Apple could outperform consensus Q2 predictions

updated 12:07 am EDT, Tue April 8, 2014

Stronger March sales could help offset weak quarter overall

Analyst Brian White of Cantor Fitzgerald, who is currently on a tour of Asia and meeting with partners in Apple's supply chain and resellers, has told investors in a memo on Monday that his sources indicate that Apple sales strengthened substantially in March, following a "soft" January and February. While still believing that sales will be down 24 percent from the holiday quarter (compared to an average drop of 19 percent), White said Apple may still "surprise" analysts -- who have been expecting revenue to be generally flat -- in its next earnings report.

AAPL year-to-date closing prices
AAPL year-to-date closing prices


According to his memo to clients, White claims that sales for Apple suppliers were up 34 percent month-over-month, significantly higher than the usual seasonal increase of 24 percent. No specific reason was given, and the rise may point more towards a healthier Q3 than have an impact on Q2 results, but the fiscal second quarter was the first full quarter that Apple has had its iPhone line available through China Mobile -- the country's largest carrier -- which may be responsible for some of the increase.

This, along with apparently strong sales of the new Mac Pro in its first full quarter, may help Apple beat the consensus estimates of $43.6 billion in revenue, based on Apple's own guidance of between $42 billion and $44 billion. The $43.6 billion estimate also matches exactly what Apple reported in revenue in the year-ago quarter, reports AppleInsider.

While it remains possible for Apple to beat analysts' stimates slightly, there is little reason to think the results will be far off the consensus estimate either way. No Apple products have received major updates, nor did any new products emerge during the quarter, suppressing any opportunity for significant revenue growth -- and making Apple even more dependent on iPhone and iPad sales to maintain the status quo. In contrast, Samsung has told investors that it's fiscal Q1 sales will miss analysts' projections, and while profits are up from the previous quarter, they are down from the year-ago quarter.

White is the same analyst who last week said he believes an "iPhone 6" with a larger display would likely be the key to unlocking the Chinese market, and added in his memo today that he'd heard from consumers that many bought a Samsung device primarily due to the larger screen sizes, since many in the country can't afford both a tablet and phone. These same buyers indicated they would consider switching to Apple if it produced a larger-screen iPhone, as it is rumored to be doing in the fall with the iPhone 6.

Interestingly, estimates from Morgan Stanley's AlphaWise service predict that iPhone sales will be strongly above consensus estimates of 39 million units, predicting 42 million units sold. If correct -- and the service has a reasonably strong track record on such predictions -- it may still not be enough to raise revenues substantially over predictions of flat growth, given White's contention of weak sales in the earlier part of the quarter, but would likely cause a jump in AAPL.

In the meantime, Apple may goose its own stock through expanded buybacks and a "modest" rise in shareholder dividend, predicts Piper Jaffray analyst Gene Munster. White has maintained his "buy" rating for AAPL, with a year-end price target of $777. Apple will reveal its Q2 fiscal results on April 23, after the markets close.




by MacNN Staff

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Comments

  1. iphonerulez

    Dedicated MacNNer

    Joined: 11-28-08

    Apple will beat nothing worthwhile in terms of expectations and the stock will plummet like it always does on earnings. Apple just wants to keep sitting on their reserve cash pile and let shareholders get hammered. There are any number of businesses Apple could purchase that would definitely give revenue a boost. Apple is going to continue to rely on the iPhone to carry the company and yet Apple should realize Android is taking almost everything from their iPhone business. Tim Cook will probably look surprised again when the stock drops to around $500. But, why should he care because he already got paid big bucks whether the company performs up to par or not. Enjoy your paycheck, Tim and don't worry about us little guys because we're not worth your time.

  1. chas_m

    MacNN Editor

    Joined: 08-04-01

    As noted in this article, Apple is indeed relying on the iPhone (and iPad) to "carry" them this quarter, but as noted in numerous articles here and elsewhere, new products in (and I quote) "new categories" are coming later this year ... on top of refreshed/revamped stuff, and on top of new iPhone/iPad models for xmas, and on top of growing Chinese, Japanese and North American marketshare ... dooooooomed I tells ya .....

    Still, if you really believe what you wrote, you should probably dump your AAPL sometime soon. Then you won't have to bemoan Cook and Co. mysteriously not taking your sage advice on how to run the business anymore, and laugh the bankrupted deluded fools who stayed in (for the record, I have no holdings in AAPL at all).

    Also the record, AAPL is up 23 percent from a year ago, but that's just, you know, a fact. I guess we should pity those poor day traders ... or something ...

  1. DiabloConQueso

    Fresh-Faced Recruit

    Joined: 06-11-08

    Yes, it painfully obvious who understands what factors drive a company's stock price and who doesn't.

    Apple is constantly buying other companies -- just not publicly, shouting it from the mountaintops. Apple has been making several acquisitions lately, and only disclosing the acquisition once a product using that acquired company's IP is released (if it's ever disclosed at all).

    Apple's had a track record of about 1 multi-million-dollar acquisition every month or two for the last two or three years now:

    http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Apple

    What, are you expecting them to acquire a company per week or something? Or is it that Apple just isn't acquiring the companies that you want them to acquire? Or would you prefer that Apple be more open and transparent about when and who they're acquiring? Or perhaps you're in the camp of "Apple should buy AMD! Then they should buy Blackberry! Then they should just buy Google and Microsoft! Then Twitter and SnapChat! And Volkswagen, just for shits and giggles! How awesome would that be?!"

    Nonsense. Nothing you said is rooted in reality, iphonerulez.

  1. Flying Meat

    Dedicated MacNNer

    Joined: 01-25-07

    Particularly the "hammered" part. Nothing remotely close to hammering is taking place. Sub-primers, now THOSE people knew how to hammer.

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