Analyst: Apple’s Q1 will beat Street by $1.2 billion

@iphonerulez - you are absolutely correct perhaps due to a few behaviors. First, a high percentage of investors still think of the world as they did in 2000, so they are just behind the curve. They’re still like, hey, what happened to Dell and Sun, they were pretty good investments, and they will still argue about a 5% Mac market share and the like. They spend too much time in their cubicles to see the demographic shift, and they don’t spend enough time around 25-to 30-year old people in cafes. Although a minority, these people represent the current and future buying power for the only consumer segment worth targeting and Apple has nailed them.

Second, just as analysts like to downgrade a stock after it has lost 75% of its value, they will only get this after it bludgeons them. One or two more quarters will establish the precedent, then the cork will pop in Q2′09 or Q3′09 when the power of the additive iPhone earnings will start kicking in. At that point the analysts will realize that their models don’t work and the story will break, and the stock will surge upward.

Plus, the base model for the multiplicative effect even ignores the earnings potential for the App Store and for mobile gaming, which will be a bigger push in the holiday season and beyond. The App store is like Apple’s money printer - the work is done by others and Apple takes a 30% cut. Within a few years this will be several billion of revenue for Apple and almost all of it will flow right to the bottom line.

I see this article posted everywhere. Is there some sort of process that the article becomes stronger the more times it gets posted. I’m sure everyone that doesn’t matter has seen it a dozen times by now.

Hello! Wall Street doesn’t give a crap. Apple will be at $90 soon and maybe back to $105 by the end of the year. No investors that matter are impressed by this report. To WS, Cisco is a better company because they make internet routers and not some high-tech toys for young-at-heart adults.

Every forum I go to there’s a bunch of people screaming that their stock is undervalued. If fundamentals no longer matter, what difference does it make what revenue numbers are produced? Apple is worth $92 and if this article is posted 20 more times, Apple is still worth $92 give or take $5 either way.

Investors should not get too worked up over this article. It has little connection with reality.

Disclosure: Long Apple for four years.

Q: How can the analysts be this far off?

A: Because they have agendas which are not compatible with careful and unbiased analysis.

I calculated that for each 7M phones sold in a quarter that produces 21.4 cents per share for each of the next 7 quarters…So there will be 8 full quarters of major increases because of the additive effect. In summary if Apple only sells 7M phones each quarter for then next 5 quarters they will earn over $3/share in 2009 just in Iphone 3G earnings from quarterly sales plus past sales. Add in the original iPhone subscription revenue and add 7 cents per quarter estimated making the total for iPhones in 2009 of $3.28. Now assume Apple does has 0% growth in revenue/EPS for Mac and iPod/iTunes and we get $4.40/share for those business units in 2009..that makes for $7.68 for 2009. Honestly with modest growth I expect Apple could post $10 EPS in 2009, making this stock severely undervalued. It is way undervalued given the no growth projections. How can the analysts be this far off?

Disclosure: Long Apple

Wow! At 15 Billion, that makes Apple’s revenue the size of an entire small country!

Every quarter that goes by, the GAAP will come closer to the non-GAAP as the number of iPhones sold in the last 2 years approaches 24 x number sold in the quarter. At some point in time, it will actually cross and GAAP will be larger than non-GAAP.

Sorry, in the last sentence I meant to say in GAAP….this is why the non-GAAP looks dramatically higher….

Hi Jim - If you want people to be able to understand whta you are saying, please repost in a legible fashion. I can’t see past the spelling and syntax errors to get a point out of the first part of your post, at least.

Hi JAy, Hi PED - Regarding GAAP vs. Non-GAAP, in my understanding the only part of Apple financials that change in non-GAAP are iPhone sales. But this is the little piece of financial magic (I call it the REVENUE BOMB) that the analysts fail to add in their projections.

So, basically if you take the analysts’ Apple Q1′09 GAAP and add this expression {(number of iPhones sold in that quarter * $500) + (trailing revenue from preceding iPhone sales quarters)} you will get the Non-GAAP revenue.

I haven’t calculated it but you see the idea, and you also see why Andy Zaky gets so frustrated with the inability of most analysts to fathom the iPhone subscription revenue model, which leads to their underprojection.

Say it with me folks…..in Non-GAAP the iPhone cash is recognized immediately but the revenue is recognized in an equal chunk at 1/8 of the revenue per phone, every quarterly, for 8 quarters.

PED,

I appreciate the report on Zaky’s numbers, and I appreciate comparing his estimates to the Street concensus.

But comparing Zaky’s non-GAAP estimates to the Street concensus GAAP estimate is like comparing apples and oranges (no pun intended).

Now, if you can find a Street non-GAAP estimate, I would like to see that comparison.

ex ped: Done. I’ve added this graph, per your request:

The only Wall Street analyst I’ve found who has projected non-GAAP earnings for this quarter is Piper Jaffray’s Gene Munster. He has Apple earning $2.70 per share (non-GAAP) in Q1 on adjusted sales of $12.4 billion.

So he guessed better than some of the rest whos (so called9 reputation and job is at stake while he is just a hobby analyst with no risk whatsoever. Good for him. But that doesnt mean Apple can, as the only tech exception, defy gravity.
No, I dont believe in this hocus pocus number juggling. And I already own AAPL bought at $88 some time ago.

Posted By llcc:
“Are you shorting apple…”

HUH? What does this have to do with the current post (or even the last couple PED posts)? I see nothing negative here.

I actually thought this was a pro-Apple piece!

Are you shorting apple…

ex ped: I don’t trade in stocks I write about.