Apple’s Q1 2013 earnings preview puts a lot of pressure on Tim Cook
As surprising at it may be for most of us out there, when it comes to investor expectations in what concerns the next year for Apple, we must tell you that they are not very high. Therefore this gives us a pretty concerning perspective and also creates an unexpected and rather dim scenario for the company, one that Apple has not been through in quite some time now.
Record iPhone and iPad sales are supposed to be registered and also reported for Apple’s 2012 holiday season, and all of the numbers will be presented on January 23rd during what has been more than once declared “the most important earnings conference call” Apple has had in a decade now. So all eyes have been turned on this date to see what the denouement is, especially that there are so many factors involved which trigger all media and consumers’ attention. It will be very exciting to hear what Tim Cook, Apple’s CEO as you all know already for sure, has to declare in order to protect himself and the company against all the rumors and predictions, and it will be interesting to see towards what directions he gears the already publicly declared investors’ uncertainty when it come to the next years of the company’s life. We will surely come back with a report on it.
So while we are so curious to see what exactly has been discussed in this so significantly important call, we also must admit the facts, and those are that over the last months, there has been a serious and concerning drop down in the AAPL stock, and to be most exact, we are talking about an actual dip below the $500 threshold. Wow!
Although these factors can not be dismissed (and there are also more to come later on in the post regarding the negative sides), Apple’s holiday quarter has nevertheless been so good that it has been assigned the title of one of the strongest ones in the company’s history. So we can not help to think now that on the one hand, we have a great and strong holiday quarter, so on the other hand there is something rather peculiar to say the least regarding the specific timing of the company’s sell-off. As mentioned, we have a noticeable growth in revenue from Apple’s previous year, when the company registered a $46.33 billion sell in the holiday 2011 period, to a $54.58 billion in revenue for the 2012 holiday quarter.
But let’s get back to the investors’ grim predictions and concerns for what’s next for Apple’s upcoming months. Although numbers have been high, it seems that there is also a sign of slowing down in pace. What we need to bring into your attention now is the release of the cheaper products’ line that also brings concern in the investors’ arena. We have the iPad mini for example in this category and investors vocalize their concerns by bringing a slip into the company’s gross margins into discussion as a direct result of the release of the cheaper products. Moreover, letting this aside for a moment, there is another type of rumor circulating around regarding the negative episode that is in store for Apple’s future, and this is particularly based on the idea that both the full size 9.7-inch iPad and also the new iPhone 5 have been suffering in component orders’ cuts from the company.
So as you can see there is a lot going on at this stage for Apple and this earnings call comes at a good time to shed some light on the actual facts. This is once more a great opportunity for the Apple heads and especially for Cook to clear out all the predictions and hypothesis that have taken proportion over the last months, and to ease the investors too. Moreover, he will hopefully have the waning demand for Apple’s products as main topic of the discussion and clarify the situation. At least this is what is expected of him from the investors’ side.
Apple is currently still in its second quarter of fiscal year 2013, so it is now when everybody should pay attention as we should be able to at this stage notice the potential decreases in demand we have been previously briefly discussing about. So March will be the quarter we need to monitor, and this is no news to anybody familiar to the entire story.
When it comes to consensus for the December quarter, then sales of 50 million iPhones and 23 million iPads is what it calls for. So there is a lot at stake and there are very high expectations coming from investors. Comparing it to the same quarter of last yer, we can again notice a considerable growth, as we back then winessed sales of 37 million iPhones and 15 million iPads. However not only good news come our way in this chapter, and when it comes to Macs, then the majority of analysts expect Apple to sell 5 million of them, which would actually be a drop down from 5.2 million that they had a year ago. Continuing with the same line of product – we must also bring to your attention that the lower sales from the holiday shopping season would also be a result of the production constraints the new iMac has experienced, and we are specifically referring to the 27-inch model.
Getting to the iPod sales predictions, these would also witness a drop from a previous 5.4 million figure in the holiday 2011 season to 12 million at the end of 2012.
The first quarter of fiscal year 2013 is expected to be most likely impacted by a huge overhaul of the company’s nearly entire product lineup at the end of calendar 2012, so therefore they foresee a 39.5 percent margin. Moving forward to the March quarter, then the perspective is different and Wall Street consensus predicts an improvement to 41.5 percent (due to production of new products improvement), whereas the revenue that Apple would earn would be of $46.9 billion.
When it comes to the market analysts, we also have a prediction as well, and their expectations mark a sell of 37.5 million iPhones, 18 million iPads, 4.2 million Macs, and 6 million iPods, so we will see how the call turns out to be and what figures are the most relevant and compatible with the actual data.
Once these having been said, we need to turn our attention in the direction of the new rumors regarding Apple’s release of a low-cost iPhone in the year of 2013, which is rumored to be designed especially for emerging markets like China, for instance, and that will be available for contract-free purchase. But analysts state that they don’t have high hopes when it comes to the Apple executives or even Cook’s addressing these rumors. Nor do they expect from Cook or Apple executives to make any comments on the other rumors that have been circulating in the media regarding the company’s potential plans expand the iPhone lineup this year in an effort to ward off less expensive handsets running Google’s Android platform. Well, both theories are connected, right.
But the “no-comment” attitude coming from Cook or his executives, and from the company itself in general, is not that surprising to any of us, and Apple is well known for its reputation of not actually discussing or getting into detail when it comes to its future product pipeline. We know this for a fact, as Cook and his executives, among which we should also mention another man with a very important position – CFO Peter Oppenheimer – have repeatedly dismissed and ignored previous questions and dilemmas raised by analysts during earlier Apple earnings calls regarding any potential rumors.
But there are also others who do not share this opinion and don’t see Apple on a down ramp as you might believe it to be. For instance, Ben A. Reitzes of Barclays Capital also believes that yesterday’s call has the “most important Apple earnings call in a decade” stamp on it, but on the other hand also explains that new product cycles from the company later this year will be a great contributor in helping to change investor sentiment. Moreover, he places Apple in the same category of the “peer group of U.S. disruptors”, just shoulder to shoulder to Amazon, Google and Facebook. In order to make his theory better understood, he brings a comparison into the equation and gives us Amazon’s and Google’s previous example, when they were both experiencing a large sell-off in the year 2011. However, despite the large sell-offs, both companies had a great rebound the next year, in 2012, so the final denouement was a positive one and they are now still highly ranked on the market to say the least.
We are now very curious to see what was the actual revealing of information about in this so awaited earnings call for the first quarter of fiscal 2013. The earnings report would be pulled out as soon as the market closes, so you can also see the agenda if you check Apple’s follow up conference call to which the media and analysts will participate (exact timings: 5 p.m. Eastern, 2 p.m. Pacific). I am very curious myself to get my hands on the released information and to draw a conclusion of my own regarding what happened in there and what was revealed. And what not.
