Apple reports earnings after the close. The stock has been beaten up enough that it will likely take really bad news to pound the shares even lower. The big question is how conservative the company’s Q4 guidance will be.
Apple’s (AAPL) Sept. quarter Mac, iPod, and iPhone sales will give a solid indicator of the company’s ability to power through a falloff in consumer spending. But investors will be paying the most attention to the forecast for the current quarter — when the crappy economy meets the holiday shopping season. Get ready for some drama.
We’ll cover Apple’s earnings LIVE today, starting with live analysis of earnings and the conference call, which begins at 5 p.m. ET. Refresh this page or our homepage later today for a link to live coverage.
The Big Issue: Guidance
As has now been well-discussed, Apple’s tendency is to lowball its guidance and then blow away those numbers. That’s worked to some extent in the past, but backfired last quarter: In July, after Apple announced that it sold a record 2.5 million Macs in its third quarter, shares fell 11% because of the company’s disappointing sales and gross margin forecast for the next quarter.
Investors have been through this enough times in Apple’s current boom to now know to expect conservative guidance. But now there’s a new variable: A cratering economy and the idea that consumers will spend less this holiday season. While iPhones, iPods, and new MacBooks are sexy in pretty much any economic climate, it’s hard to tell what kind of predictions Apple will make.
Yesterday, Piper Jaffray analyst Gene Munster noted that over the last two years, Apple typically guides EPS 9% below Street consensus, and typically guides revenue 4% below expectations. (Yet the company’s actual results have beaten the Street’s EPS estimates by an average 27%, and revenue estimates by an average 4%.)
This quarter, Munster — an Apple bull — thinks the company will guide even more conservatively: revenue 15% below consensus to $10.1 billion and EPS 5% below consensus to about $1.41. Meanwhile, RBC’s Mike Abramsky, also an Apple bull, expects the company to guide to $10.6-10.7 billion in sales — above the Street’s $10.57 billion published consensus — and $1.55-1.65 in EPS — below the current $1.65 published consensus.
Any guidance near, at, or (obviously) above consensus will likely drive shares skyward, and any sign of a consumer slowdown — guidance below Munster’s guesstimates, especially — will spook investors.
- Q3 Revenue: $8.05 billion consensus, $7.8 billion guidance, $8.3-8.4 billion whispers
- Q3 EPS: $1.11 consensus, $1.00 guidance, $1.22-1.25 whispers
- Q3 Mac Sales: 2.7 million consensus, whispers up to 3.0 million
- Q3 iPod Sales: 10.8 million consensus, whispers up to 11 million
- Q3 iPhone Sales: 4.5 million consensus, whispers up to 7.5 million
- Q4 Revenue: $10.57 billion consensus, whispers down to around $10.1 billion
- Q4 EPS: $1.65 consensus, whispers down to around $1.41