Apple: Neil Cybart sees OK quarter, no blowout

From a note to Above Avalon subscribers posted Wednesday morning:

The ingredients are in place for Apple to report an OK quarter next week relative to Wall Street expectations and management’s guidance.

Taking a closer look at each line item, it’s not clear how Apple would be able to report a blowout quarter. The iPad faced some major headwinds earlier in the quarter. Meanwhile, the iPhone faces a significant Greater China headwind.

As with every quarter, Wall Street will quickly look to management’s 3Q17 guidance to gauge how business is trending. When it comes to establishing a line in the sand, $45B of 3Q17 revenue looks like a worthy contender. If management’s revenue guidance falls below $45B, the implication is that iPhone unit sales are trending below 2016 levels. Considering how tough 3Q16 results were, that would be saying quite a bit. If revenue guidance exceeds $45B, we are looking at Apple reporting iPhone unit sales growth similar to 1Q17 and 2Q17.

Below: Cybart’s estimates for Apple’s fiscal Q2 2017, laid out just the way I like to see them:

  • Revenue: $53.6B (guidance: $51.5B to $53.5B)
  • Gross Margin: 39.0% (guidance: 38.0% to 39.0%)
  • EPS: $2.10 (consensus: $2.02)
  • iPhone: 52.5M (up 3%)
  • iPad: 9.1M (down 11%)
  • Mac: 4.3M (up 7%)
  • Apple Watch: 1.9M (up 25%)
  • Services: $7.2B
  • Other Products: $2.3B
  • Buyback: 60M shares repurchased

We’ll find out how well Cybart and the other independent Apple analysts fared against Wall Street’s professionals when Apple reports its results next Tuesday, May 2, after the markets close.

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