Piper Jaffray's Gene Munster Says Own Apple into Earnings
Apple (NASDAQ: AAPL) is set to report its June quarter earnings on July 24 after the market close. Every quarter the company's earnings are a huge deal not just for Apple, but for a myriad of other stocks and the entire market. Given the company's $570 billion market cap, and the numerous other publicly traded companies that benefit from the Apple ecosystem, the news will will move the markets significantly. Ahead of the report, Piper Jaffray's Gene Munster is telling investors to own the stock.
Munster estimated that the company will report iPhone sales for the quarter between 28 million and 29 million which is ahead of the Street's calling for a range of 25 million to 27 million. "We believe investors should own AAPL going into the June quarter earnings as we expect the company to report iPhone units better than low expectations of the buy side," Munster wrote. He added that he is "confident" that iPhone sales will come in ahead of the Street. He cited "sustained weakness" at lagging rivals such as Nokia (NYSE: NOK) and Research in Motion (NASDAQ: RIMM).
However, Munster said that guidance could be even more conservative than usual for Apple ahead of the anticipated debut of a new iPhone model in October. As a result, he lowered his September quarter iPhone sales projection from 26 million to 24 million. "We expect a more conservative guide than usual because of our belief that the iPhone 5 will launch in October, while the Street has mixed expectations in terms of pricing," he said. For iPad, Munster is estimating sales of 16 million units which is largely in-line with consensus estimates.
The Piper Jaffray analyst noted that the iPad is the most difficult product to predict, but that he is comfortable with his estimate which implies year over year iPad growth of 73 percent. This would represent a "meaningful step-down from previous iPad growth rates." Nevertheless, this new product market is continuing to grow at a very fast pace and should continue to drive revenue going forward. In the quarter, the iPad is expected to account for around 24 percent of Apple's sales.
"We note that iPad units have been up an average of 153% [year over year] over the past four quarters," Munster wrote. "We note that iPads have remained in stock over the past several weeks on the Apple Store, suggesting supply is meeting demand."
Heading into the report, Wall Street analysts have consensus EPS estimates of $10.39. This compares to EPS of $7.79 in last year's corresponding quarter. Sales are expected to be $37.41 billion, representing year over year growth of 30.90 percent from the $28.57 billion the company reported last year.
Investors should understand that Apple has a track record of absolutely blowing out Wall Street expectations, so a simple beat on the top and bottom line won't be enough to move the stock higher. Instead, investors will be looking for considerable upside to these estimates. If the company does not substantially beat consensus estimates, this stock could fall hard.
The general pattern in recent years, however, has been for Apple to report a massive beat on EPS and revenue in combination with very conservative guidance, which many investors completely discount. Frequently the stock trades higher immediately after earnings, sometimes substantially, before paring gains in the coming days. Nevertheless, earnings are normally a positive catalyst for the stock, even if the gains fade in subsequent days.
On Monday, AAPL shares had added a little less than 1 percent to $609.40.
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