January (1Q) 2013 Earnings Preview


December 28, 2012 (11:30 am)

I’ve completed my estimates for 1Q 2013. Apple’s fiscal year ends 12/30, so the fiscal first quarter takes place from October – December.

iPads: We expect 25 million iPad sales, a 78% increase over last quarter’s 14 million. We modeled a decline in average sales price (ASP) to $495 from $535 last quarter to reflect the strong expected sales of the lower priced product. While this represents a stronger sales spike than we saw during the previous holiday quarter, this estimate incorporates (a) the launch of the iPad mini, which looks to be having exceptionally strong sales, (b) sales in a number of additional countries, and (c) a re-filling of the channel draw down we saw heading into this quarter due to the revamped iPad 4 in early October.

iPhones: We expect 54 million iPhones to be sold this quarter, or about double last quarter’s 27 million. During the previous holiday quarter, we saw sales of 37 million iPhones vs. 17 million in the previous quarter (an increase of 117%). There was similar discussion last year about either weak demand for the iPhone 4S or supply constraints, that would limit sales. In our view, based on availability of the new iPhone 5, supply constraints are no longer a significant issue. While supply has not yet met demand, it is much closer now than at the beginning of the quarter when we first established our estimates. We’re comfortable with this number. We also slightly bumped up our ASP expectation to $640 from $636 due to the likely higher sales of the more expensive 5 vs. the 4 and 4S.

iPods: We’re modeling a 20% decline in iPod sales year-over-year. New iPods were announced in early September, but were not on sale until October. While sales should be substantially higher than last quarter due to holiday sales, we expect additional canibalization by the iPhone. We also expect a relatively stable ASP at $150 per unit.

Macs: We expect Mac sales to be relatively flat year-over-year, although we’re modeling for a slight bump in ASP’s from $1,269 to $1,340 due to the release of the MacBook Pro with retina display and new iMacs. Demand has been high. The higher sales price of these new unit will likely drive an overall bump in the price of average sales for the Mac line, driving revenue to $7 billion.

Other: The iTunes store and sales of peripherals/software has been relatively stable over the past few quarters, growing at a steady (and slow) rate. We’re modeling slight growth due to holiday sales of iOS devices.

Margins: We expect gross and net income margins to compress over the past quarter, in line with previous quarters during which there are significant new product introductions. As they ramp up production, margins will increase over time. This quarter, we’re modeling 39.0% gross margins, a 1.0% drop over the last quarter and a 5.7% decrease over the previous year. We’re also using the lower end of the net income margin range of 24.4%.

Overall, we expect revenues to come in at $60 billion and EPS of $15.41. EPS for the last twelve months will grow to $45.70 and the company will likely report upwards of $143 per share in cash.

1Q13 Estimate