Last quarter, Apple (AAPL +0.84%) delivered spectacular results. It also issued fairly strong revenue guidance of $52 billion to $55 billion for the March quarter. As seems to be the norm these days, analyst consensus is for Apple's revenue to come in at $55.50 billion, which is ahead of the high-end of Apple's own guidance.
Now, I can understand why analysts are particularly bullish: Apple has managed to significantly beat expectations over the last quarter, which may give the impression that Apple is intentionally giving conservative guidance.
I totally understand that, and it wouldn't be terribly surprising to see Apple manage to hit (or even exceed) bullish analyst consensus for the March quarter. The iPhone 6 and iPhone 6 Plus have been very well received and sales momentum with those devices may have continued into the March quarter.
However, it's the quarter following the quarter that Apple is set to report on that has me concerned.
Analyst expectations and historical trends
Analyst consensus for the June quarter sits at $46.79 billion in sales (15.7% sequential decline), representing 25% year-over-year growth. Although the June quarter is expected to be seasonally down, analyst consensus seems to be calling for an acceleration in the year-over-year growth rate.
For some perspective, the seasonal decline between the March and June quarters last year was actually 18%. Now, there are a couple of "obvious" drivers for the better-than-typical seasonality that the analyst community expects:
- iPhone 6/6 Plus have more staying power than the iPhone 5s/5c did last year
- Apple will start recognizing Apple Watch revenue, which wasn't present in the year-ago period.
These are certainly good points, but there are certainly risks to those expectations.
The Galaxy S6 is reviewing well
Last year, Apple's iPhone 5s went head-to-head the Samsung Galaxy S5 during the June quarter last year. Apple delivered very strong financial performance while S5 sales reportedly disappointed, showing which company won that battle.
This year, Samsung is fighting the iPhone 6 with the Galaxy S6. In reviews, the S6 seems to be doing pretty well; the "tone" that I get from them is much more positive than the one that I received from reading the Galaxy S5 reviews last year.
Interestingly enough, in Joanna Stern's review of the S6 for The Wall Street Journal, she noted that even though the Galaxy S6 and S6 edge are "in many ways more impressive pieces of hardware than [her] iPhone 6," she's "sticking with Apple."
Why? She prefers Apple's "app selection and product ecosystem." She also seemed to prefer iOS to the Samsung-skinned variant of Android 5.0 found on the device.
If Samsung gains share, will Apple lose share?
Stern made it clear in her review that she believes that the S6 is the best Android phone available today. The question for Apple investors is, if the S6 manages to drive share gain for Samsung, where might those share gains come from?
Will those potential gains come mostly from HTC, LG, and Xiaomi buyers switching back to Samsung, or will iPhone users be compelled to switch, too?
That's a question I don't think anyone knows the answer to right now. However, if the S6 proves compelling enough to grab back share against iPhone or, at the very least, lower the rate at which Android/Samsung users switch to iPhone, then that might pose a risk to estimates for Apple's June quarter.
Another risk: Apple Watch
It's not clear how much Apple Watch sales are baked into the analyst estimates for the June quarter, but if they're significant -- and if the Apple Watch fails to sell as some of the more bullish analysts expect -- then this could also serve as a risk of disappointment among investors.
