Apple's Guidance for Next Quarter Is Nothing to Obsess Over

Apple announces solid results for its fiscal third quarter

Jul 22, 2014 at 7:00PM

U.S. stocks finished higher on Tuesday, with the benchmark S&P 500 gaining 0.5%, putting it within one-tenth of a percentage point of the record high achieved at the beginning of the month. The narrower Dow Jones Industrial Average (DJINDICES:^DJI) rose 0.4%, while the technology-heavy Nasdaq Composite Index (NASDAQINDEX:^IXIC) was up 0.7%.

The most valuable company in the Nasdaq, Apple (NASDAQ:AAPL) outperformed slightly in the run-up to the release its fiscal third quarter results, with an 0.8% gain, but it's giving back some of those gains in the after-hours session, as analysts and investors appear to be focused on the company's guidance for the current quarter. I think that's a mistake.


First, the numbers for last quarter. The following table summarizes Apple's performance on revenues and earnings per share, both on an absolute basis and relative to Wall Street's expectations:


Actual/Year-on-Year Growth

Analysts' Consensus Estimate


$37.4 billion


$38.0 billion

Earnings per share




Sources: Apple, Thomson Financial Network.

Sure, Apple may have missed with regard to revenues, but if you look at both revenues and earnings per share on an absolute basis, these are respectable numbers for a company of Apple's size. Sales of the iPhone -- Apple's flagship product -- increased 12.7% year on year to 35.2 million, short of analysts' forecast for 35.9 million.

However, investors appear to be mainly disappointed by the guidance for the current quarter. The following table compares Apple guidance against analysts' estimates going into this report:


Apple Guidance/Implied Year-on-Year Growth

Analysts' Consensus Estimate


$37.0 billion-$40.0 billion

(1.3%) - 6.8%

$40.4 billion

Earnings per share*




*Author's estimate, based on the midpoint in the guidance range for each input and assuming share count decreases at the same rate as over the past four quarters. Sources: Apple, Thomson Financial Network.

There is nothing dramatic here, although the spread in the guidance range for revenues is wider than usual. Addressing this point, Apple CEO Tim Cook told The Wall Street Journal that this reflects a "lack of visibility," highlighting the uncertain impact of rumors regarding new products on consumers' propensity to upgrade earlier or later and uncertainty linked to growing demand in emerging markets.

All told, I think it's silly to focus on guidance for a single quarter; furthermore, at a forward price-to-earnings multiple of 13.4, there remains a margin of safety in Apple shares, even as they approach their all-time split-adjusted high of $100.82.

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Alex Dumortier, CFA, has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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