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Wall Street not thinking positively about Apple’s upcoming earnings

Apple(s AAPL) earnings are over a week away, but anticipation of the results are dribbling out. So far, they’re showing some dampened expectations among analysts who monitor Apple’s numbers. The big thing seems to be worry about whether iPhone sales are slacking off.

Apple investors being nervous is becoming more the rule than the exception in the past year. Sometimes it’s justified, like last quarter when profits dipped for the first time in a long time; other times, like the handwringing that preceded Apple’s record January results, it’s not.

Currently, there’s some worry about — what else — iPhone sales. It’s Apple’s most important product, and accounts for half of the company’s quarterly sales. Verizon’s ability to sell iPhone is now a particular concern, according to Bloomberg Businessweek:

Under a multiyear deal signed with Apple in 2010, Verizon Wireless is obligated to buy $23.5 billion worth of iPhones in 2013 alone, according to Craig Moffett, a telecommunications analyst who left Sanford C. Bernstein & Co. earlier this year to start his own research firm. Since the purchase commitment is more than twice what Verizon Wireless sold in 2012, the company may have a shortfall of $12 billion to $14 billion, worth $4 to $5 per share, Moffett said in the report.

The thinking is that Verizon hasn’t been able to sell as many phones as it anticipated three years ago, which means it’s buying less this year. And that could be a sign of less demand for the iPhone. (Verizon reports its earnings next week.)

If iPhone sales aren’t keeping pace with the rate of a year ago, or stay flat, as some other analysts are forecasting, that would be a new development. Even though Apple’s quarterly profits dipped last quarter, its iPhone (and iPad) sales were still ahead of their 2012 paces.

Apple doesn’t forecast its device sales, but it did offer a forecast of revenues between $33.5 billion and $35.5 billion, which would be either even or lower than the $35 billion it reported the same quarter a year ago. In that quarter, iPhone sales were also a bit lower than what Wall Street had anticipated. Current analyst estimates are for revenues of $35.17 billion and earnings of $7.33 per share, down about $2 from the $9.32 Apple reported a year ago.

It’s possible we’ll see something similar this quarter, especially as there have been no major product launches during the quarter besides some new MacBook Airs.

Apple is scheduled to report earnings on Tuesday, July 23.

7 Responses to “Wall Street not thinking positively about Apple’s upcoming earnings”

  1. With a PE ratio of only 10, and considering it’s the second most profitable company in the world (second to Exon), the stock is currently way oversold as is. Not too concerned about speculations on upcoming earnings. The negative anxiety has already been way overplayed. Synergies created in iOS7 new API’s, and their very sticky happy apple customer eco-system make their long term future look bright.

  2. dreamtiger

    Apple has been through these pauses numerous times. They can’t reinvent an industry every year, and many times, product releases are iterative rather than groundbreaking. This is nothing new, and those of us who have been with Apple long term know this: Apple is doing what it has always done. What is new is the huge amount of yellow journalism, ignorant analysts, and paid blog comments directed against Apple, & attempting to spin the story in favor of Apple’s competitors. Some of it is sheer ignorance, and some of it is deliberate malice. None of it will make any difference in the long run, because the world still looks to Apple for direction. My bet is AAPL will begin to pick back up this fall, and regain what it has lost in 2014.

    • fredhstein

      Good points Dreamtiger. Adding:
      1) All the worries are already priced in. Any short-term downside is small compared to the long-term upside.
      2) The buybacks provide further downside protection and significant upside. Each share purchased increases future EPS, while reducing supply when demand for shares returns.
      3) Dividends make it easy for the wise investor to wait.

      For a deeper view:
      Surely the iPhone’s amazing margins and growth are history. But Apple has also proven the power of incremental innovation. A stellar example is the MacBook Air. They command better than 50% share in the ultralight notebook segment. Sony’s best effort newly release Windows8 model is $150 more expensive and nearly spec for spec the same. Sony does lower the weight by 1/2 lb and has a brighter screen – but their battery life is about 1/2 of Apple’s. From the PowerBook in 1997 to June’s MBA, Apple has grown that business and taken business from the competition.

  3. Jack Autrel

    Verizon does not signal doom for everyone else. They may not have met their expectations. But can not count out the multitude of other countries where iPhones have become easier to purchase based on either Apple’s programs or carrier deals.

    Will it be a great quarter, probably not. But the shortsightedness of everyone now a days is absurd.

  4. Laughing_Boy48

    Apple shareholders are as good as dead for this quarter’s earnings announcements. There is absolutely no good news forthcoming. Apple will disappoint Wall Street again as it has over the last year. The only comfort shareholders will be able to receive is in knowing that Timid Cook is also going to have part of his salary taken away. Not that the average shareholder is like the CEO who makes tens of millions of dollars every payday.

    Although Apple should realize how important iPhone sales are, Timid Cook never stepped in to really start pushing iPhones until just recently. Apple should have been moving into new nation markets back as far as early last year unless Apple never saw the smartphone market becoming saturated. That’s the only thing I can think of that makes sense. Apple is sitting on this huge mountain of cash and did almost nothing to prevent its smartphone empire to evaporate overnight. Apple is worth no more than what its iPhone empire is worth. When it goes, Apple has nothing else to hold the company’s share price up.

    Apple sitting on a mountain of cash while its business goes into steady decline is just beyond foolish and having a CEO that doesn’t recognize that fact only makes matters worse. Both Google and Amazon are becoming very wealthy companies while Apple spins its wheels and starts sliding backwards. It’s very frustrating for any Apple shareholder to watch as the CEO fritters away Apple’s chances of holding its lead despite having all that money at its disposal.