This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Apple Earnings Preview: What About the iPhone?

SAN FRANCISCO ( TheStreet) - Apple (AAPL - Get Report) announced several new products this week, including the much-anticipated iPad Mini, but the attention now turns to fourth-quarter earnings, and more specifically, the iPhone, Apple's biggest revenue driver.

The fiscal third-quarter was a rare miss for Apple, as the company blamed Europe and speculation about new products for the earnings miss. In the fourth quarter, which ended Sept. 30, Apple launched the iPhone 5 to incredible pent-up demand, selling over 5 million units during its debut weekend. Even though CEO Tim Cook has described the iPhone 5 as the fastest-selling phone in history, supply chain constraints have prompted concerns on Wall Street that Apple may not make its numbers again this quarter.

Sterne Agee analyst Shaw Wu, however, believes these concerns are overblown. In a recent analyst note, Wu estimates that Apple sold around 27 million iPhones during the quarter, slightly ahead of Wall Street forecasts of between 25 million and 26 million phones. "We believe investors have gotten overly pessimistic with demand and near-term component issues," he wrote. "As we have said before, our supply chain checks have indicated still robust demand trends, despite Maps concerns and production capacity has improved due to better yields on in-cell touchscreens." He rates Apple shares "buy" with an $840 price target.

According to analysts polled by Thomson Reuters, Apple is expected to report $8.74 a share in earnings on $35.8 billion in revenue.

Recent results by AT&T (T - Get Report) and Verizon (VZ - Get Report) may also point to upside in iPhone sales, potentially satisfying investor concerns. AT&T announced it activated 4.7 million iPhones in the quarter, but did express some caution. In its press release, AT&T said its postpaid results were negatively impacted by iPhone 5 inventory levels, and the large majority of third-quarter iPhone sales went to existing customers. Verizon activated 3.1 million iPhones during its third quarter, 651,000 of which were iPhone 5s.

The iPhone generates most of Apple's quarterly revenues, so any worries about supply constraints are going to weigh on investors' minds.

Baird Equity Research analyst William Power notes that supply constraints may have eased a bit recently, but there are still concerns for the all-important first quarter. "We expect solid FQ4 results when Apple reports October 25, with the bigger focus likely on comments regarding iPhone 5 supply in FQ1," Power noted. "Importantly, our checks suggest strong overall demand, though supply limitations could limit FQ1 upside. However, our checks indicate that supply has improved moderately over the past week, which could be an encouraging sign." He rates Apple "outperform" with a $750 price target.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $130.01 -1.90%
T $34.76 0.14%
VZ $49.49 -0.24%
FB $79.63 -1.10%
GOOG $532.32 -1.44%

Markets

DOW 18,041.54 -190.48 -1.04%
S&P 500 2,104.20 -21.86 -1.03%
NASDAQ 5,032.7510 -56.6110 -1.11%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs