updated 08:39 pm EDT, Wed July 10, 2013
Analysts apparently taking Apple guidance more seriously now
Reports are surfacing that Apple may release a disappointing quarterly earnings report for investors on July 23. The consensus from 35 Wall Street pundits polled exactly matches the revenue from the year-ago quarter at $35.02 billion -- meaning zero revenue growth for the quarter, which is traditionally Apple's slowest. Apple itself said it would earn between $33.5 billion and $35.5 billion for the quarter, which ended on June 30.
The lack of growth may actually be a positive sign, though analysts are unlikely to see it that way. With industry trend-watcher Gartner reporting that worldwide PC shipments have fallen more than 11 percent year-over-year, Apple's ability to maintain revenue levels will likely show its increasing reliance on "post-PC devices," particularly against rivals such as HP that don't have a significant presence in those markets. Fortune's panel of 17 independent analysts (who have typically been more accurate) are, as usual, somewhat more upbeat than Wall Street, predicting the company will manage a small increase in revenue, to $36.16 billion.
Fortune polled the analysts in light of Apple not giving any guidance to actual earnings in its last conference call -- only revenue and gross margins (which it said would be between 36 and 37 percent). Thompson Financial, which also compiles Wall Street consensus estimates, believes Apple will report $35.17 billion in revenue and earnings of $7.33 per share.
Cowan and Company analyst Matthew Hoffman offered some specific guesses on sales, estimating 30 million iPhones and 16 million iPads will have been sold, alongside 3.71 million Macs and 4.1 million iPods. He believes the company will squeak out a fractional increase in revenue to $35.4 billiion and EPS of $7.35 with a gross margin of 35.4 percent. Prior to hearing Apple's guidance, Hoffman had issued significantly higher estimates in all categories, estimating Q3 revenues at $40.8 billion and an EPS of $10.03 with much higher iPad sales and a higher 40 percent average gross margin.
Assuming the predictions of nearly-flat revenue growth hold true, it remains difficult to say how it will affect the stock price, which has seen slow rises over the past week. Apple is unquestionably doing better overall than any other US-based desktop and notebook manufacturer in terms of growth, just as it has outpaced the industry's overall record for years.
However, the real growth in the technology industry is with smartphones and tablets, and while Apple also dominates those fields its growth rate on its biggest product, the iPhone, is swamped by the consolidated growth of the entire Android smartphone industry. While still the most dominant single brand (particularly in the US) worldwide, Apple's three models of iPhone compete against some 400 Android-based offerings from a wide variety of companies, most notably Samsung. The increase in viable competition to Apple's former smartphone dominance has weakened the company in the eyes of the industry, despite its continuing to be by far the most profitable player.
But even Samsung is not without its troubles -- the company's stock has also taken a beating following reports that its flagship phone the Galaxy S4 isn't selling as well as expected, and Samsung is also feeling some heat from the declining PC market, for which it is a major component and accessory supplier as well as manufacturer. HTC, another major Android phone maker, has also seen its stock plummet following the failure of its flagship phones to catch on with the public. New offerings from Microsoft and BlackBerry have also failed to reverse those companies' fortunes.
Regardless of whether AAPL takes a short-term beating for the possible failure to grow revenue in Q3, Apple has pre-loaded expectations for a record fiscal fourth quarter with promises of numerous new products and OS updates all appearing in "the fall" -- just before the holiday buying season that mark Apple's fiscal first quarter. The Q3 results may be hurt by the expectation that Q4 will be the same or worse -- since by Apple's own admission, most of the killer products it is set to unveil are unlikely to appear until the end of that quarter or beyond it. For example, iPhone sales are likely to drop significantly in late summer as consumers hold out for the fall release.
Last quarter, AAPL took flack for having flat Mac sales and a dip in profits for the first time in a decade (even though iPhone and iPad sales were above expectations). There have been reports that Apple has ordered fewer iPhones during this past quarter, so the company's top moneymaker will be even more sidelined as the summer marches on. Apple may surprise analysts with the strength of iPad sales, however, and the new MacBook Air (and presumed Q3 release of Haswell-based MacBook Pros) may bolster Mac sales more than currently anticipated -- but expectations for the company overall are pinned on the fiscal Q1 holiday buying season, when Apple will greet consumers with a slew of updated, new and upgraded products and software.
Apple's Q3 conference call is scheduled for July 23 at 2PM Pacific/5PM Eastern on July 23. MacNN will have live call coverage, and Apple will provide a live audio stream of the call, and the company will make later replays on demand available as well.