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A Forecast Of Apple's Performance in Q3 2014

June 29, 2014 | About:

The analysts have predicted that for the fiscal year ending in late September, Apple (NASDAQ:AAPL) is due to deliver reported revenue of over $182 billion versus reported revenue in the prior fiscal year of $170.91 billion. In dollar terms, revenue growth in the range of $12 billion appears more impressive than the underlying revenue growth rate of between 6% and 7%.

Apple had on March 29, 2014 announced its financial result for the second quarter. The Company posted quarterly revenue of $45.6 billion and quarterly net profit of $10.2 billion, or $11.62 per diluted share. These results compare to revenue of $43.6 billion and net profit of $9.5 billion, or $10.09 per diluted share, in the year-ago quarter. Gross margin was 39.3 percent compared to 37.5 percent in the year-ago quarter. International sales accounted for 66 percent of the quarter’s revenue. However, for the six-month period ended in June, the iPhone and iPad lines represented 75.20% of Apple's reported revenue total of $103.24 billion. While Apple's aggregate revenue rose 5.22%, the combined iPhone and iPad lines delivered revenue growth of 6.31%, the Mac line realized 8.64% revenue growth year-over-year and the combined iTunes/Software/Services & Accessories segments achieved revenue growth of 11.29%. The iPod line, in contrast, experienced a 53.82% decline in revenue. The iPod line's revenue decline in the six-month period was $1.671 billion. iPod line revenue fell from $3.105 billion in the first six months of FY2013 to $1.434 billion in the first half of FY2014.

Revenues From iPods:

In FY2011 iPod revenue was $7.453 billion. In FY2012 iPod revenue fell to $5.615 billion and in FY2013 iPod sales revenue came in at a lowly $4.411 billion. This fiscal year, iPod revenue may come in at or below $2 billion. In the first half of FY2014, iPod unit sales revenue declined by more than 50% on a year-over-year basis. The demise of the iPod product line materially reduced Apple's aggregate revenue growth rates over the past three fiscal years and will again reduce Apple's reported revenue in the fiscal year ending in September by more than $2 billion. Although Apple has recently reduced prices on the iPod touch and added conspicuously missing features to the entry-level model, this will not forestall the product line's fade into oblivion. This fiscal year, the decline in iPod unit sales will reduce total reported revenue by about $2.25 billion.

Moving forward, the iPod line will be essentially immaterial to the company's results in FY2015 as Apple's reported revenue will move above $200 billion. The iPod line will represent less than one percent of Apple's reported revenue total in the coming fiscal year. The net impact of the iPod line's demise is that next fiscal year Apple's reported revenue growth rates will reflect more the underlying growth rates of the company's three major device lines. Any new products or services released this fall will be wholly accretive to revenue.

“We generated $13.5 billion in cash flow from operations and returned almost $21 billion in cash to shareholders through dividends and share repurchases during the March quarter,” Apple’s CFO, Peter Oppenheimer had said during the March earnings release. “That brings cumulative payments under our capital return program to $66 billion”, he had added.

Industry experts are currently forecasting revenue growth in the June quarter of about 7.0% to $37.80 billion and revenue of $40.57 billion in the September quarter representing expected revenue growth of 8.30%. For the fiscal year, the revenue consensus is $181.61 billion or a year-over-year revenue rise of about 6.30%. These consensus estimates reveal Wall Street expectations for revenue growth to accelerate in the second half of the fiscal year.

The forward looking analysis can be summed up to say that even though people have written iPods off but these devices still generate umpteen revenues for the company. When we compare the performance with that of iPads we find that iPods contribute significantly more than iPads. Come September and only ten can we know how much of a change will the revenues see from the last release in March.

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