April 2011
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Day April 25, 2011

The iPad slowdown and impact from the Japanese disaster

Tim Cook explains that there was no material impact from the Japanese disaster:

“Regarding our global supply chain, as a result of outstanding teamwork and unprecedented resilience of our partners, we did not have any supply or cost impact in our fiscal Q2 as a result of the tragedy,

Estimates for Apple's third fiscal quarter (ending June)

Apple’s CFO guidance statement:

We expect revenue to be about $23 billion compared to $15.7 billion in the June quarter last year. We expect gross margin to be about 38%, reflecting approximately $55 million related to stock-based compensation expense. We expect OpEx to be about $2.5 billion, including about $255 million related to stock-based compensation expense. We expect OI&E to be about $70 million and we expect the tax rate to be about 25%. We are targeting EPS of about $5.03.

Apple Management Discusses Q2 2011 Results – Earnings Call Transcript – Seeking Alpha

Last quarter Apple guided revenue growth at an aggressive 63% with an EPS growth of 47%. They delivered 83% and 93% respectively.

They are now guiding about 47% revenue growth and 43% EPS growth and my current estimates are 65% and 72% respectively based on the following:

  • iPhone units: 14.7 million (75%)
  • Macs: 4.3 million (25%)
  • iPads: 9.8 million (200%)
  • iPods: 8.0 million (-15%)
  • Music (incl. app) rev. growth: 25%
  • Peripherals rev. growth: 25%
  • Software rev. growth: 25%
  • Total sales: $25.8 billion (65%)
  • GM: 38.5%
  • EPS: $6.02 (72%)

The biggest uncertainty remains iPad growth. This will be the first quarter where we can dial in a y/y growth rate. I’m being bullish with 200% because I believe the ramp for the iPad 2 may get sorted out. There are also more countries being opened up this quarter (13 this week).

Apple’s stock price to earnings ratio has dropped to 16.72. Ex-cash it’s 13.5. On a forward basis (my estimates) it’s 8.3. Apple’s valuation is now a case for business historians to discuss because I don’t think there are modern precedents.