Apple Can Print Money, but Can It See the Future?
Apple's financial performance blew past Wall Street expectations yet again during the company's second fiscal quarter. It's become a regular ritual: Apple offers ultra-conservative guidance figures, Wall Street sets its expectations slightly higher, and Apple surpasses them all, quarter after quarter. But should shareholders believe Apple's estimates this time around?
04/25/12 8:36 AM PT
Apple once again blasted Wall Street's -- and its own -- predictions on its financial performance for the March quarter of this year.
The company announced Tuesday that it raked in US$39.2 billion in revenue during the period, which is Apple's second fiscal quarter. That's more than a 58 percent increase over the same period a year ago, when revenues were $24.7 billion.
Revenue estimates for the quarter by Wall Street analysts were around $36.67 billion. Apple previously advised revenue would be around $32.5 billion.
Apple pro forma earnings per share (EPS) also exceeded expectations, coming in at $12.30, compared to Wall Street's prediction of $10.04 a share and Apple's of $8.50 a share.
Cannibals, Not Competitors
Apple's crushing of Wall Street predictions and posting of record-setting numbers is getting to be old hat for some analysts.
"I'm not surprised," Rocco Pendola, author of the Pendola Stock Option Newsletter and contributor to the Seeking Alpha investor website, told MacNewsWorld.
"I thought there might be a little more weakness than there was, but they're rolling on all cylinders right now," he said.
Currently, competition is not influencing Apple's success, he maintained. Its products may cannibalize each others' sales, but sales, by and large, aren't being lost to competitors, he asserted.
"When Apple loses sales, it loses sales to itself, which is a nice problem to have," he added.
Overseas sales helped rocket revenues during the period. According to Apple, 64 percent of revenue during the quarter came from international sales.
"The European numbers were better than what most of us expected," Rob Enderle, president and principal analyst of the Enderle Group.
"Overall," he continued, "the profits were way up -- quite a bit better than any of us expected, a stunning quarter for the company."
The next quarter, though, won't be as rosy as the March one, if Apple's own predictions are to be believed. At an earnings call on Tuesday, CFO Peter Oppenheimer forecast revenues for the June quarter would be $34 billion, with an EPS of $8.68.
A Little Sandbagging?
Most of Wall Street isn't buying Apple's predictions, however. Analyst consensus for June quarter revenues is $37.4 billion, with an EPS of $9.93.
Apple typically gives ultra-conservative outlooks, which was the case once again, Brian White, a stock analyst with Topeka Capital Markets, wrote Tuesday in an investment note. He is currently predicting revenues of $38.9 billion for the quarter, with an EPS of $10.62.
"It's Apple's history to use very conservative guidance and then blow it out," observed Pendola.
iPhone sales may take a hit during the June period as consumers brace for a new release of the handset during the fall, Enderle noted.
"Other than that, there might be a little of Apple sandbagging," he added. "I really don't see any weakness in Apple until the fourth [calendar] quarter."
At that time, he explained, Apple's competitors plan to launch offensives on all product fronts, most significantly Microsoft's Windows 8 launch campaign.
Not Crying Wolf
Apple defended its guidance at its earnings call. "When we give you guidance, we give you guidance that we have reasonable confidence in achieving," CFO Oppenheimer said.
Apple should be taken at its word this time, according to Trip Chowdry, an analyst with Global Equities Research.
"Apple's numbers were very good on the top line and the bottom line, but I think the guidance given should be taken seriously because the macro environment in which Apple is participating is very difficult," he told MacNewsworld.
"With high gasoline prices, consumers may pull back on buying Apple's next best gadget," he explained.
"It may not be prudent for investors to disregard Apple's guidance this time," he added. "If gasoline prices remain at these levels, consumer spending power will be reduced and they won't buy as many Apple products as people think they will."