Is Apple Going to Miss Earnings Again?

Mark your calendars: Apple (Nasdaq: AAPL  ) reports fiscal third-quarter earnings on July 24. Leading up to the release, analysts are already chiming in with what to expect, and interestingly some think a miss might be in store.

Contestant No. 1
Last week, Wedge Partners analyst Brian Blair said the iPhone maker might not hit the Street's iPhone estimates. In the first two quarters of its fiscal year, Apple put up mind-boggling unit sales of 37 million and 35 million iPhones. That's just over 72 million iPhones in the first half of the year, almost matching the 72.3 million units sold throughout all of the prior year.

Blair thinks iPhone unit sales may have ticked down to between 28 million and 30 million units, which could miss if estimates end up north of 31 million units. Keep in mind that analysts constantly tweak their estimates for Apple, so the consensus is always a moving target. Blair also expects the fiscal fourth quarter, ending in September, to see a significant drop-off as it did last year, when Apple missed, because consumers are now well attuned to Apple's annual upgrade cadence. Even if this happens, he thinks Apple will bounce back with monster iPhone sales of 45 million to 50 million in the December quarter.

Contestant No. 2
Topeka Capital Market's Brian White, who seems dead-set on having the highest Street price target on Apple, notes that sales activity among a handful of component suppliers that he tracks is below historical norms, implying potential iPhone weakness. This basket, which he's dubbed the "Apple Monitor," thanks Apple for between 50% and 60% of sales.

Sales fell 13% sequentially among these companies, when they're normally about flat. White acknowledges that this could easily be weakness in other sectors, particularly as there's been pessimism over broader IT spending.

Contestant No. 3
BMO Capital Markets analyst Keith Bachman thinks the next two quarters will be "challenging" as we approach this year's iPhone introduction, although he did increase his price target by a whole $5, from $695 to $700. His model clearly now predicts that Apple should be worth a whopping 0.7% more than previously thought -- an entire Lincoln more! Apple shareholders rejoice!

When looking a little further out, though, Bachman is raising his estimates over the next six quarters, which will factor in the next iPhone launch. He also sees iPad sales eating into Mac sales as expected cannibalization sets in, reducing his Mac estimates over that time frame by 40%.

Source: Earnings press releases.

I wouldn't be too worried, though, since the iPad is already a bigger business than the Mac and has been for the past four quarters, and they carry rather enviable margins.

Contestant No. 4
Barclays Capital's Ben Reitzes isn't scared. He thinks some of these fears are "overblown" but still thinks a miss may be possible. Even if Apple doesn't meet expectations, however, he doesn't consider it a concern and thinks investors are looking for iPhone sales in the 27 million ballpark. Reitzes also pegs iPad sales around 14.2 million, but the number could be boosted even higher because of the reduced price of the iPad 2s that are selling into educational institutions.

Street analysts are notorious for having no idea how to forecast Apple's sales. Some of this pessimism is even weighing on suppliers, like Cirrus Logic (Nasdaq: CRUS  ) , which was down as much as 10% today on no specific news relating to itself. Since the company relies so heavily on iDevice sales for its audio codec revenue, a little bit of iPessimism goes a long way with bringing it down.

Any way you slice it, even if Apple sells 27 million iPhones, which would be on the low end of estimates, that's still 35% growth from last year and more than $17.5 billion in revenue. Hard to call that a miss.

Apple has plenty of room to run, and this new report outlines all the reasons why. Grab yourself a copy to see what our own top tech analyst has to say about the Mac maker's prospects.

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Cirrus Logic and Apple. Motley Fool newsletter services have recommended buying shares of Apple and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (13) | Recommend This Article (37)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 11, 2012, at 1:32 AM, SimchaStein wrote:

    Sure iIO devices drive the stock price and both are late in their cycle. But I expect the new MacBook sales will be a big upside surprise like 50% more than prior quarter. And don't forget Chinese sales channels and available markets are still expanding. Finally, Dads and Grads provide an extra boost.

  • Report this Comment On July 11, 2012, at 5:09 AM, deemery wrote:

    The track record for these analysts is pretty bad. So if you believe that prior performance is any indication, the people to watch are Horace Dediu and Daniel Tello. http://tech.fortune.cnn.com/2012/07/10/how-many-iphones-did-...

  • Report this Comment On July 11, 2012, at 5:29 AM, macgregor54 wrote:

    Apple didn't miss the last time. It beat. The analysts missed by over-predicting, which is what they do. Factually, the professional analysts have a pretty poor track record of predicting Apple performance, usually coming in way low on the list of accuracy Dewitt compiles.

    Not only that, but the drum beat when Apple announces things like the iPod Touch, the iPhone, the iPad and iTunes and the Macbook Air were all pretty negative and look where that went.

    Analsysts. Right. See you on the 25th.

  • Report this Comment On July 11, 2012, at 6:08 AM, bugnuts wrote:

    In the April conference call, Cook and Oppenheimer signalled that iPhone sales would tail off a bit, but iPad sales would skyrocket. Apple's word is much more reliable than the voodoo these analysts peddle.

  • Report this Comment On July 11, 2012, at 5:30 PM, johnluma wrote:

    Well there it is -- PROOF this slacker company is headed down the slippery slope to failure! I knew their becoming the richest, most successful corporation in America was just a smokescreen to weakness and overblown PR.

  • Report this Comment On July 11, 2012, at 5:40 PM, Educationist wrote:

    I think very soon Apple's rise is over. To anything in the world there is rise and fall. So, be prepared for the bad days. Wise people have made money when the Sun was shining. Now people need to look for another pasture!

  • Report this Comment On July 11, 2012, at 5:57 PM, chiro85 wrote:

    All of the wall street "pros" want the price estimates lower right now for their own various reasons. Mostly I suspect they want you to sell them your holdings at a cheap price so they can take your $$$. With great companies like aapl, this is a common pattern. You pump and dump "weak" stocks but with great strong stocks like aapl they get the common schmo to dump, then they pick up your stock and THEN they pump, ie after the E.R. Anybody who trust the financial industry is a fool. Any body who believes these come ons from The Fool is a bigger Fool.

  • Report this Comment On July 11, 2012, at 6:09 PM, WealthLift wrote:

    All of the bears are forgetting about Apple in CHINA! The tech giant will reach a deal with China Mobile, the world's largest telecom provider, so that iPhones can be sold to its 660 million subscribe base. You want a bold prediction? AAPL will hit $800 by next winter.

  • Report this Comment On July 12, 2012, at 12:05 PM, lowmaple wrote:

    If you are an investor Bring on the "miss". This is another chance to buy cheaper. And your divident % will then be higher.

  • Report this Comment On July 12, 2012, at 12:59 PM, Bonmotten wrote:

    It is unwise to flirt with Miss Earnings.

  • Report this Comment On July 13, 2012, at 12:17 PM, mieswall wrote:

    For the "again" of the title you mean the ONE time that AAPL "missed" in 8 years?

    You MF guys, that like negative numbers (as Mako, Gmcr, et all proves...), 29 of 30 last quarters these guys have been wrong.

    Sorry, 30 of 30, 'cause that single "miss" was done precisely by those same analysts, not by Apple.

  • Report this Comment On July 15, 2012, at 9:03 AM, dschmedeke wrote:

    Apple is full of surprises. I am one of that Apple has been good to as an investor. I am optomisic!!

  • Report this Comment On July 16, 2012, at 10:29 PM, fab2020 wrote:

    aapl is a monster company with monster products and once you factor in china mobil in, will see a higher price on the stock............

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