Apple Q4 preview: All eyes on holiday sales; China could swing it

Apple Q4 preview: All eyes on holiday sales; China could swing it

Summary: In what is expected to be a strong December quarter, Apple has three major questions to answer: Can it keep its iPhone momentum going; can it recover its crumbling share price; and can it continue to ride the waves of the lucrative Chinese market?

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TOPICS: Apple
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The main focus on Apple's first-quarter earnings will be on December holiday sales, and how many iPhones were sold, the company's main revenue generator.

Screen Shot 2013-01-22 at 12.03.23

The company is expected to report fiscal first-quarter earnings of $13.43 per share on revenue of $54.7 billion, according to Wall Street estimates. Apple will dish out its latest earnings on January 23 after the market closes.

iPhone

Thanks to recent AT&T and Verizon earnings, plenty are jumping on the "blown out of the water" rhetoric. For instance, US cellular behemoth Verizon sold 6.2 million iPhones in the past quarter, with just over half of those being iPhone 5 smartphones. It's expected that Apple could break through 50 million iPhones sold per quarter, if it's lucky.

Apple needs to keep its iPhone division in check, and smartphones selling like hotcakes. After all, that's where Apple's money maker is.

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Apple Q4: China growth, Cook slams Surface, iPad mini margins

Apple Q4: China growth, Cook slams Surface, iPad mini margins

The Cupertino technology giant's fourth quarter earnings are out. On the call, Apple executives discussed China, retail stores, iPad mini profit margins, and Tim Cook even took time to slam Microsoft's latest tablet incarnation.

By comparison, take a look at a year ago. Apple blasted expectations out of the water by reporting earnings per share of $13.87 on revenue of $46.33 billion, well above estimates.

A mixed year

Since then, we've had a mix of good and bad. Market instability, Eurozone worries, and a super storm marring the launch of the long-awaited iPhone 5 and semi-expected iPad Mini; but a strong recovery in the Asian supply chain following the Thai floods, and a bevy of hardware releases by the company. And, China--let's not forget--in which Apple is still working its way in, but has its foot firmly in the door.

With expected record sales and an overall strong quarter, which typically sees higher sales thanks to the holiday season--seemingly negating the tough third quarter the company had to battle through and put on a brave face for--all eyes will be on how Apple can break into China with full gusto.

China's influence

At the last earnings call, Apple chief executive Tim Cook noted that 15 percent of the company's revenue came from China. Since then, the Cupertino, California-based technology giant has added the iPhone 5 to China's second and largest cellular networks--but missed out on China Mobile, the world's largest cellular networks by subscribers, partially due to an incompatibility with the company's hardware infrastructure.

But by already making in-roads into the vast China populous, the maker of shiny rectangles could expect to see even higher profits in its iPhone division, thus powering even the higher analyst estimates.

Make no mistake: A push into China, combined with strong iPhone sales, could all but carry the quarter.

Looking ahead to the second quarter

Citi analyst Glen Yeung pointed out three important points. Firstly, on the iPhone, he said: "iPhone figures could achieve or modestly beat the 45 to 50 million units anticipated by consensus."

On looking ahead to the fiscal second quarter, "given the strong showing from Samsung, under most scenarios for iPhone shipments in the December and March quarters, Apple will lose smartphone unit share [year on year], raising concern about the ongoing dominance of [the] iPhone."

On the iPad, he said that full-sized iPad sales have been "more sluggish" with an expected decline of 30 percent to 40 percent in the second quarter, but thanks to the iPad Mini the company's first- and second-quarter sales will meet consensus.

In a nutshell: The iPhone should retain its stake as the company's power handle. The iPad is shrinking--literally--and so are the company's sales, but thanks to innovation in the 7-inch tablet space, Apple could rebound. iPod sales will continue to decrease as the music player becomes increasingly irrelevant with the iPhone's dominance, and Mac sales will remain mostly flat, if not on a mild decline.

What will remain at the top of the questions list by analysts is exactly why Apple's share price has, in the space of 12 months, risen and shot past $500 per share, all the way up to $700 per share, and then fallen back down sub-$500.

Topic: Apple

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5 comments
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  • Beware the Apple frenzy

    The Verizon numbers come from the same analyst that has been saying apple stock should be valued at 1111$ (since July 2012). Keep what matters in focus. Apple predicted approx 50 mil unit sold for the 4th quarter (the hype took it higher). As long Apple comes close they are Okay (Not great). They still have decreasing market share and supplier problems that Wall Street worries about. Still a lot to work on.
    alex_darkness
    • Question about unit sales

      Where was it that Apple stated that they expect to sell ~50 million iPhones in the 4th quarter? I ask because it's unlike them to project actual sales numbers for a product. Like many companies, they do provide guidance on earnings and what have you...but if you could provide a link showing where they specified unit sales I'd really appreciate it.
      UGottaBKidding
  • "By comparison, take a look at a year ago. Apple blasted expectations out"

    -- strange phrasing, because we do not know yet what will happen this year (well, tomorrow), to apply "by comparison".
    DDERSSS
  • "Expectations" by comparison

    in other words, expectactions were at X amount, Apple beat then handily.
    Expectations are lower, so will Apple beat them handily?

    That is what he's comparing - will they blow out, meet, or fall short of expectations (as they did the last two quarters?)
    William Farrel
  • The thing to remember is that

    it is not really about revenue, but profit. Apple, according to the Economist, has around 10% of the mobile handset market yet makes fully 75% of the profits. Go figure.
    paddle.