Last year Apple sold 26 million iPhones and 17 million iPads for revenues of $35 billion and a profit of $8.8 billion in its third quarter. It was up from the 2011 third quarter, but it wasn’t stellar.
Expect something similar Tuesday when Apple reports 2013 Q3 numbers.
Wall Street is expecting revenue in the same range — $35 billion — and reduced profits due to lower margins. iPhone sales have been surprising at Verizon and AT&T, but analysts are still predicting at best sluggish growth and at worst reductions in iPhone and iPad sales, which drive almost three-quarters of Apple’s revenue.
“We are reducing our iPad forecast in 3QFY13 to 14.5 million from 15.9 million and lowering our Mac unit forecast to 3.8 million from 4.2 million,” White said in a research note. “Due to the timing of the lower-priced iPhone and iPhone 5S launches in 4QFY13, we are lowering our iPhone unit estimates for the September quarter, while also cutting our iPad projections on a refresh that appears unlikely to impact 4QFY13.”
White kept his iPhone forecast at a relatively high 28 million units.
The challenge is not only a soft macroeconomic environment, but the fact that as Apple cEO Tim Cook warned us months ago, Apple released virtually no new products this summer. With that dearth of visible innovation, and the fact that consumers who want Apple’s latest and greatest are waiting for an expected iPhone 5S and cheaper iPhone in September or October, sales appear to be weak.
There also may be a little bit of revenue hacking going on as various analysts have said that the new products have been ready for some time, but Apple may want to save them for a bigger quarterly revenue opportunity in its fourth 2013 quarter or first 2014 quarter (a holiday quarter).
That’s White’s current belief. He still has Apple stock pegged at a sky-high $888 price target:
“With Apple on the verge of what we believe will be a major product cycle over the next 12-18 months and the stock trading at an anemic 6x CY14 P/E multiple (ex-cash), we believe it would be shortsighted to place too much emphasis on the Company’s near-term financial performance,” he wrote.
Wall Street’s consensus is for 26.5 million iPhones and 3.9 million Macs, although recent NPD numbers suggest Macs might be even lower.
Most of the bad news is likely, as White suggests, temporary, and it appears to be already priced into the stock, which is currently around $425, down from highs around $700 last year but up from sub-$400 depths earlier this year.