$37.064B in revs and $8.18 EPS for fiscal Q4 2013.
$55-60B rev guidance for fiscal Q1 2014.
More after the jump. (TL;DR warning)
Q4 2013 Home Game Estimates
EPS: $8.18 (Net Income: $7.34B)
GM – 37%
OpEx – $3.925B
Tax rate – 26.5% (same as Apple guidance)
Outstanding shares – 898M (assuming a net share reduction of about 26.3M – 11M of which were guided as “default net share reduction” by Oppenheimer during fiscal Q3 2013 conference call in the absence of any further buybacks and adjustments)
iPhone – 33.5M sold @ $590 “ASP” (about 24% YOY unit growth)
iPad – 13M sold @ $425 ASP (about -7% YOY unit growth)
Mac – 4.35M sold @ $1250 ASP (about -12% YOY growth)
iPod – 4.1M sold @ $155 ASP (about -23% YOY growth)
iTunes/software – $4.2B (assumes ~ 20% YOY growth rate)
Accessories – about $1.51B (assumes ~ 20% YOY growth rate)
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This is basically a top-end Oppenheimer guidance estimate. While I don’t consider myself “confined” by his guidance parameters, it just so happened this quarter that my home game numbers are very, very close to those “boundaries”. OpEx was assumed to be midrange, and tax rate as guided by Oppenheimer (he’s generally accurate on both, though he guided over actual for OpEx last quarter).
Unit and ASP assumptions are explained below.
ASP should see an uptick this quarter and a significant sequential uptick next quarter – the iPhone ASP mix is potentially richer than ever thanks to the $649 ASP iPhone 5C option, and iPhone 5S remains supply constrained in the US (based on iPhone availability trackers) without any whispers of poor iPhone 5S yields (that I’m aware of, anyway). I think it’s quite possible for iPhone ASP to be well over $625 in the holiday quarter.
That’s when Apple has 100% “current inventory” to sell, though. My guess is Apple had somewhere between 12-15M or so new iPhones (5S/5C) sold from the late September launch, with this “richer ASP” contributing to between one third and one half of total iPhone revenue in fiscal Q4. Also, just in case Apple had more iPhone 5Cs than 5Ses to sell into the channel at launch, I moved up ASP just under $10 for this quarter. It may be quite conservative!
As far as units, you know about my “add 4 million to last year’s total” comparison of this and last year’s iPhone launches as a start. Aside from that, iPhone 5’s “below expectations” launch + fiscal Q4 2012 performance actually was a quarter of 58% YOY unit growth. It’s unlikely Apple will have anything near 58% unit growth for fiscal Q4 2013, but it’s also undeniable that:
>>> iPhone growth accelerated from Q3 2012 to Q4 2012 thanks to an infusion of new product (expect a similar trend Q3-Q4 2013),
>>> iPhone 5S/5C are off to a much faster start than most people anticipated, and also
>>> the new 8GB iPhone 4S models needed to be sold into the channel (considering that iPhone 4 was mildly popular in FY 2013, I’m sure Apple was able to sell a few thousand or so iPhone 4Ses to willing carrier partners and retailers in that 10-or-so-day interval – and hey, maybe a few thousand people bought ’em! :D).
I think it would be unwise to dismiss out of hand the >50% (and up to 80%) acceleration in initial sales from the prior year – a small data point, but still useful for getting a sense of demand and sales velocity. Add to that the probability of some middling growth YOY in iPhone prior to the fall lineup of iPhones going on sale (remember: iPhone has always grown YOY); more plentiful points of sale; and China added as a launch country; and I just don’t think 24% YOY unit growth is excessive.
ASP is projected to decline slightly, partly out of conservatism, partly because there’s been no sign the trend will reverse based on prior quarters (though of course there would be a limit to the decline). For units, Apple’s iPad data point implying 14.9M iPads sold between the start of fiscal Q4 2013 and sometime in October (?) does set a maximum iPad number, but not a minimum. I projected a decline in YOY growth due in large part to buyers holding off purchases on Retina iPad mini rumors, along with waiting for a redesigned “regular” iPad after three generations of the same-looking iPad.
Now, yes, if you make a “straight-line” extrapolation from Tim Cook’s remarks at this week’s iPad event, the iPad number could be as low as 14.9M / 16 weeks * 13 weeks = 12.1M as kind of a “worst case” scenario. But that assumes iPad buying didn’t trail off as fiscal Q4 2013 drew to a close. There’s always the possibility my iPad number could be “high”, who knows.
Mac – PCs are trucks? Well, most of Apple’s Mac product lines remained “unrefreshed” in fiscal Q4 2013 – new iMacs were only available for about 4-5 days that quarter. I think a -12% YOY growth rate is at least reasonable given talk of the overall negative trend in PCs. ASP is assumed to be down on account of “lower-priced” MacBook Airs with standard configs ranging from $999-1299. We’ll see if Mac Pro, more appealing Retina MacBook Pros or potential retina MacBook Airs next year do anything to slow or reverse the current trend.
iPod – Too small to be a cash cow at this point – I’m estimating iPod to be <2% of Apple’s total revenues this quarter. A far cry from the old days, iPod seems “kept around” more for branding and for the sake of having a product offering than for the revenue/profit benefits, as preposterous as that sounds (just because of how far Apple has come since iPod was introduced). Yes, “Apple loves music”, and the commitment endures. Kind of.
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AAPL Tree Out on a Limb™ Guidance Prediction
Now to go even farther out on a limb, and guess Oppenheimer’s issued guidance*** (except for OI&E, which is anyone’s guess, and tax rate – pick a rate between 24% and 28%):
OpEx of $5.25B
The story, as it always is, will be about iPhone first and iPad second. ASP will almost certainly bounce back into the $600s for iPhone, and probably into the mid/high $400s for iPad. Meaning that in either case, the net “ASP compare” from the year-ago holiday quarter will be either about the same or even slightly favorable, depending on buying habits (for example, will iPhone 4S be as popular as iPhone 4 in FY ’13, or will iPhone 5S/5C usher in renewed enthusiasm for Apple’s higher-end offerings). It’s easiest to see iPad ASP bounding over $436 (Q3 2013 ASP) on account of iPad mini being $70 more expensive at the low end, with the top-end model actually matching the selling price of the previous top-end iPad 4 + LTE. So it’s conceivable that iPad ASP could even see $500+ aided by iPad Air, but I’m keeping it relatively conservative for now.
That leaves growth, which many analysts fear is gone at Apple Inc. One hindrance to revenue growth – the decline in ASP – is now neutralized or even eliminated this holiday quarter. So, is there unit growth? For iPhone, it’s kind of a no-brainer – iPhone growth has never stopped YOY and there’s no reason to believe the trend will stop with initial iPhone 5S/5C sales being well over expectations. Whither iPad? Considering how Tim Cook keeps saying how quickly the tablet market is growing and how it’ll overtake PCs (albeit with the help of tablets that are really more like bigger slate media players in both relative capability and use case)? I don’t think it’s too much of a stretch to say Oppenheimer will guide to YOY iPad growth.
Perhaps my “conservative” is actually “slightly optimistic” when it comes to AAPL. That’s why I’m very mindful to check my numbers for potential bias. But I’m thinking Oppenheimer has just enough confidence to guide Wall Street in the direction of 10-15% iPhone and iPad growth YOY.
The media would, quite rightly, see that as hardly worth celebrating if they decided to undertake the level of surface analysis I’m undertaking right this post. And yet? These “ho-hum” numbers, combined with a reasonable-sounding ASP per product, are enough to beat analyst consensus by at least $4B on top-end revenue. I suspect many analysts would be pleasantly surprised if this happened.
Don’t forget, if the actual quarterly numbers start looking so good even Oppenheimer can’t deny them :D, Apple can – and likely will – issue an upward revs/earnings revision of some sort before the fiscal Q1 2014 earnings release.
We’ll have a much clearer picture of Apple’s *cough* “turnaround plan” in just one trading day. Good luck to all!
(As a just-for-fun bonus – I’m assuming 885M shares in the holiday quarter, GM of 37.5%, tax rate of 26.5%, and an implied top-end EPS of about $14.50.)
***Yes, I’m guessing what’s essentially another guess. Except Oppenheimer knows full well what Apple’s expectations are, and Wall Street relies heavily on guidance as part of its reaction to earnings (at least in my humble opinion). So there you go.