John Paczkowski

Recent Posts by John Paczkowski

Apple Earnings: A Basic Beat or a Blowout?

Wall Street expectations for Apple earnings are seldom high enough, but for the company’s third-quarter results, which it posts after market close today, they seem particularly tame.

Analysts polled by Thomson Reuters anticipate Apple’s third-quarter earnings will be $10.36 a share on revenue of $37.2 billion. That’s more than the $8.68 a share on revenue of $34 billion Apple forecast when it reported second-quarter earnings in April, but it’s still a bit low.

The reason? Well, there are a few, but the most oft-cited by analysts is this: iPhone sales are slackening ahead of an expected fall refresh of the device. Said Sterne Agee analyst Shaw Wu, “Talking to investors, there appears to be understanding that the next two quarters will be ‘choppy’ ahead of the next generation iPhone.”

The latest batch of estimates for iPhone sales falls in the 25 million to 29 million range. That’s better than the 20.34 million Apple sold during the same quarter last year, but down significantly from the 35.1 million it sold in the March quarter. Estimates on iPad sales range from 16 million units up to 20 million, which is double the number Apple sold in the same quarter a year ago.

But these are pro estimates. Independent analysts seem to be considerably more bullish about the quarter. On average, they are expecting earnings of $12.31 on sales of $41.50 billion. And they don’t see quite as big a slowdown in iPhone sales. Andy Zaky, of Bullish Cross Asset Management, one of the most accurate independent Apple analysts around, told AllThingsD he expects Apple to ship 32 million iPhones and 20 million iPads on the quarter.

And his view of the quarter overall is nowhere near as muted as that of the pros on Wall Street. “[We expect] Apple to report roughly $12.46 in earnings per share on $43.1 billion in revenue, which is well above the consensus this quarter,” he said. “I think that would be considered a blowout. … Of course, it doesn’t really matter what Apple reports on earnings, the stock is going to react positively. Short of a miss, it will gap-up on earnings. And that’s because expectations are so incredibly low for the quarter. … Apple has gapped-up after earnings 10 out of the last 12 quarters since the lows of the financial crisis, putting the odds at over 83 percent.”

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik