Apple this afternoon reported financial results for its fiscal first quarter ended December 31 that simply demolished Street expectations.
The company posted revenue of $46.33 billion and profits of $13.87 a share. Street consensus for the quarter had been for $39.1 billion in revenue and profits of $10.16 a share; guidance was $37 billion in revenue and profits of $9.30 a share.
Apple beat expectations in every major project category.
During the quarter Apple sold:
IPads: 15.43 million (13.6 million iPads had been forecasted for the quarter)
iPhones: 37.04 million (30.2 million iPhones had been forecasted for the quarter)
Macs: 5.2 million (5.16 Macs had been forecasted for the quarter)
iPods: 15.4 million (13.6 million iPods had been forecasted for the quarter)
Trading in Apple shares had been halted in late trading on Tuesday for a few minutes ago pending the earnings announcement, but the stock price has since soared to a new 12-month high of 446.50 (+26.25 or 6.24%) at the end of trading on Wednesday, January 25, 2012.
Gross margin in the quarter was a mammoth 44.7%, up from 38.5% a year ago. Analysts had expected gross margins of 40.7%, a bit ahead of the guidance at 40%.
Guidance was also impressive, especially given the company’s tendency to take a cautious approach when predicting the future. Here are Apple's forecasts for FY Q2:
- Revenues: $32.5 billion (The Street projects $32.1 billion).
- Earnings Per Share: $8.50 a share (TheStreet projects $7.99 earnings per share).
TheStreet's Apple forecasted unit shipments for Q2 2012 (March 31, 2012) are as follows:
- Macs: 4.5 million
- iPods: 6.75 million
- iPhones: 26.2 million
- iPads: 10.4 million
You can expect all of those to ratchet hire after the astonishing December performance. StreetAccount notes that over the last five years, March quarter revenue has been down on average 18% from the December quarter. The guidance suggests a sequential drop of almost 30%.
Apple generated over $17.5 billion in cash flow from operations in the quarter. The company now has cash and marketable securities worth $97.6 billion, up from $81.5 billion one quarter earlier.
CEO Tim Cook said in a statement.
“We’re thrilled with our outstanding results and record-breaking sales of iPhones, iPads and Macs. Apple’s momentum is incredibly strong, and we have some amazing new products in the pipeline.”
Here is the full transcript of Apple's earnings call of 5:00 pm EST, Tuesday, January 24, 2012:
Update: here are some key points from the post-earnings conference call:
- CFO Peter Oppenheimer says the company was thrilled to report a tremendous quarter. They set quarterly records for iPhones, iPads and Macs.
- Revenue was up 73% from a year ago.
- Mac sales were up 26% year over year. Average weekly Mac sales were up strongly. Asia/Pacific Mac sales were up 58%.
- They had 3-4 weeks of Mac channel inventory.
- Mac App store: more than 100 million apps downloads in less than a year.
- iPod Touch was more than half of all iPods sold. They still have over 70% of the MP3 market.
- They were in target range on iPod inventory.
- iTunes Store had $1.7 billion in revenue in the quarter. They have over 20 million songs now.
- Over 140 million apps and content downloads on December 25.
- iPhone sales were up 128% year-over-year. They had strong growth in all segments.
- Oppenheimer says customers are “captivated” by Siri.
- Channel inventory was up 200K in the quarter, and remains below target levels, at a little under 6 million units.
- iPad sales were up 111% from a year ago. Revenue from iPad and iPad accessories was up 99%. Sell-through was about 200,000 ahead of sell in. Inventory is in line with target levels.
- 1.5 million iPads in use in educational institutions.
- Over 3 million copies of iTunes U have been downloaded.
- Now over 315 million iOS units sold.
- More than 85 million iCloud users to date.
- Over 550,000 apps in the app store; 175,000 for the iPad.
- Developers earnings will top $4 billion by the end of this month.
- Apple retail stores had $6.1 billion revenue, up 59% from a year ago.
- They opened four stores in the quarter, including Grand Central, now 361 stores total.
- Average $17.1 million revenue per store in the quarter.
- The company averaged 22,000 visitors per store per week.
- The company said it is actively discussing what to do with its cash, but has nothing to announce today. He says it is not burning a hole in their pocket.
- CEO Tim Cook noted particularly strong sales of the iPhone in the U.S., Japan and Greater China. He says they bet high on demand for the iPhone, and could have bet even higher, given short supply of the phone in some markets.
- China demand for the iPhone is “off the charts.”
- Cook says the component environment is favorable, which helped them over-achieve on gross margin; he thinks that will remain the case, with the exception of hard drives due to the floods in Thailand. He says they will have to pay more for drives in the quarter, but adds that he does not expect them to have short supply of drives.
- He says NAND flash, DRAM and displays were in a situation of supply exceeding demand in the quarter, and will continue to be the case in the March quarter.
- The company sees gross margin falling 270 basis points in the March quarter from December; there were some one-time items that will go away; they also benefited from a better mix, mostly in iPhone sales in the latest quarter.
- On competition from other tablets for the iPad: Cook says they are really happy with their iPad sales in the quarter. He says their long-term belief remains that this is a huge opportunity for Apple. He says they really believe that eventually the market in units will be bigger than the PC market. He says tablets have already exceeded the desktop PC market in the U.S. in the fourth quarter. On competitiveness, he notes that the ecosystem for the iPad is in a class by itself.
- On his comments about the cash position, Oppenheimer elaborated that they have always discussed the cash position. He says that their discussions on what to do with the cash is “active.” When we have something to announce, he added, they will announce it.
- In response to a question on the company’s position in the living room, Cook said that the Apple TV product is doing well. But he noted that they still classify it as a hobby. But he has nothing new to say about TV products.
- On his time as CEO so far, he says he loves Apple, and that he feels “lucky.”
- Oppeneheimer says they are looking at all uses of cash, what they might do in the supply chain, or acquisitions, or dividends, or buybacks. (Analysts keep trying to pry some information out of them on this subject to no avail.)
- Cook notes that they now have 130,000 points of sale throughout the world, up 35% from a year ago.
- Cook says that China Unicom is a good partner, and adds that they are always looking for ways to expand their presence in China, but he had nothing to say on new carrier relationships.
- Oppenheimer says iPhone sales will be up year-over-year, but down sequentially, same with iPad.
- Why the big percentage drop forecast: An extra week in the December quarter; last year, they increased iPhone channel inventory by 1.7 million units; December quarter benefited from iPhone 4S launch, the fastest launch ever. And the dollar has strengthened against the Euro, which will affect the sequential compare.
- Cook says the Apple and Android competition is not like Mac and Windows. The Mac is still single digit percentage of worldwide market. Cook says that NPD data shows that in the U.S., looking at October and November, that iPhone had 43% of the market with Android at 47%. Nielsen data shows iPhone 45%, Android 47%. ComScore shows iPhone 42%, Android 41%. He concludes that it is a very close race on iPhone vs. Android. In tablets, iPad is way ahead. Cook says he would not say it is a two-horse race, given the horse in Redmond, and other players. He says they will continue to keep innovating and ignore how many horses there are.
- On 4G and the potential for larger screen sizes for phones, Cook said he won’t talk about the future road map. He says a lot of people out there love what they’re doing.
COMMENTARY: Wow, those are truly impressive numbers for Apple's 1st Quarter ending December 31, 2011. Apple is firing on all cylinders, dominating in every financial measure imaginable.
In a blog post dated January 8, 2012, I had reported Apples iPad sales numbers for the calendar years 2010 and 2011 (Nine months):
- Calendar Yr Ending 12/31/10: 14.79 million
- Nine Months Ending 9/30/11: 24.67 million
Apple sold 15.43 million iPads for Q1 2012 (Quarter ending December 31, 2011), so total iPads sold for the calendar year ending December 31, 2011 is 40.10 million.
Apple's Q1 2012 revenues and unit ships by product are as follows:
- iPhone handsets and iPhone accessories: $24.4 billion (37 million units)
- iPads and iPad accessories: $9.1 billion (15.43 million units)
- iPods and iPod Accessories: $NA (15.4 million units; iPod Touch over half of iPods sold)
- iTunes Store: $1.7 billion (Over 20 million songs now listed)
- Macs: $NA (5.1 million units)
- Mac App Store: $NA (100 million downloads in less than a year)
- iBooks Author App: FREE (600,000 downloads)
- iTunes U App: FREE ( 3 million downloads)
- iOS Devices Q1 and Cumulative: 62 million for the quarter and 315 million iOS devices of all types sold to date
- Apple App Store: Now had 550,000 apps; 150,000 are for the iPad
- Apple Stores: $6.1 billion (Now has 361 stores; $17.1 million avg gross per store and 110 million visitors)
Analyst notes this morning are throwing around words like “awe-inspiring,” “stellar,” “blowout” and “blockbuster” to describe Apple’s fourth-quarter results, which stone-cold blew away analyst estimates, pushing the stock up more than 7% in early trading and making the company once again the biggest public company in the US.
Analysts are scrambling to raise their price targets for the stock, though one of the street’s biggest Apple bulls held firm to his devilish target of $666 (it’s currently just below $450).
That would be Ticonderoga Securities analyst Brian White, who last night wrote of the Applepocalypse:
"Apple Crushes Even the Most Optimistic Expectations, $666 Here We Come.This evening, Apple reported 1QFY12 sales of $46.33 billion compared to our revenue estimate of $39.39 billion (Street was at $38.85 billion), while pro forma EPS of $13.87 crushed our $10.15 projection (Street was at $10.08). Recall, Apple’s 1QFY12 outlook called for sales of $37 billion and EPS of $9.30. Looking into 2QFY12, Apple expects sales of $32.5 billion and pro forma EPS of $8.50 versus our revenue projection of $31.5 billion (Street is at $32.0 billion) and EPS projection of $7.57 (Street is at $8.02). … In our view, this is clearly a quarter to remember and speaks to the momentum at Apple that we believe has further room to run, ultimately driving the stock to our 12-month price target of $666."
Not satisfied with that note, White this morning wrote that Apple “takes our breath away:”
"We remain aggressive buyers of Apple as we believe the market continues to severely underestimate the long-term, sustainable earnings power of the company and potential for a gusher of a cash dividend in the future. The stock is currently trading at just 7.5x our CY12 EPS estimate (ex-cash) and we expect Apple’s product portfolio momentum to continue…"
Canaccord Genuity analyst Michael Walkley, meanwhile, raised his target to $650 from $560 and said he thinks Apple might soon be doling out some of its massive, $97 billion cash pile:
"Based on the remarkable iPhone sales, we estimate Apple’s unit share of the smartphone market increased from 14% during CQ3/2011 to 23% in CQ4/2011”
We anticipate another year of record cash generation. With Apple expected to cross $100B in cash during the March quarter, we believe this milestone might push Apple to announce a dividend."
FBN analysts also raised their price targets to $650, from $515 earlier, and also get excited about a possible dividend:
"The strong overall revenue growth (47% on $36B in revenue) and the very strong GM (44.7% vs. 40% guidance) show the strength of AAPL’s current position in the market. Furthermore, with additional catalysts later this year (iPad3 perhaps in April, iPhone 5 in CH2, iTV in late 2012 or in early 2013), AAPL simply has too much going for it right now. Investors are rightfully wondering what AAPL will do with its net cash (now $97.6B, or $96/share, up from $82B or $82/share in the prior quarter); should it declare a dividend or more actively repurchase shares, then its stock price has more catalysts still."
Citi raised its target to $600 from $500 and sees a big buyback program coming:
"We are significantly raising FY12 and FY13 EPS by 15% and 29%, respectively. The revisions are primarily driven by higher revs and gross margin estimates resulting from an improved iPhone shipment outlook. We note that roughly 11% of the earnings revision for FY13 is based on our assumption that mgt will initiate a share epo program starting in 2CQ12 and begin buying back $10B/qtr."
Goldman Sachs raised its target to $600 from $550 and sees a bunch of catalysts:
"Even after this quarter’s upside, we believe the year is chock full of catalysts to drive further share price momentum. We continue to expect a late March quarter iPad refresh and a lower price point for the iPad 2, as well as a mid-year iPhone refresh. We believe the MacBook Air will continue to gain share in the PC sector, and we believe Apple will finally launch an iOS-based television in late 2012 or early 2013. Finally, our expectation for a dividend announcement this year could represent a critical catalyst that brings a new class of investors into the stock."
Sterne Agee raises its price target, too, but to a more-modest $550 from $540. We admire their reserve, but this seems a little timid, especially considering they see a new iPad in our future:
"Driving this was very strong pentup demand for the new flagship iPhone 4S, as well as strong momentum for the iPhone 4 and 3GS. In addition, it appears that the competitive impact from AMZN’s Kindle Fire was much less than expected. Gross margin came in at 44.7%, much higher than expectations of 40%-41% due to a favorable component pricing, as well as a mix shift towards iPhone.
For its outlook, AAPL guided above consensus, which is rare for a company known for its vintage conservative guidance. For the March quarter, the company is looking for $32.5 billion in revenue and $8.50 in EPS vs. consensus at $32 billion and $8.03 in EPS. While AAPL does not pre-announce future products, we believe this guidance implies that there could be an iPad update in the quarter, which is consistent with what we have been seeing in our supply chain checks."
Hudson Square Research doesn’t need to raise its price target because it already sees Apple going to 700 freaking bucks! It simply needs to lather on the praise:
"Apple reported an awe inspiring quarter with sales above expectations across all product lines."
Pacific Crest called the quarter “unlike anything we have ever seen” and raised its price target to $580 from $470:
"The launch of Amazon’s Kindle Fire created no noticeable impact on iPad sales, and strong sell-through of iPad and iPhone prevented Apple from building its preferred level of channel inventory. Both signals point to an incredible level of demand for iPhone and iPad that should support robust unit sales for the foreseeable future.
Higher iPhone and iPad unit estimates drive our F2012 EPS estimate to $45.13 from $34.84, F2013 EPS estimate to $47.39 from $36.43. We are raising our F2012 iPhone unit estimate to 124 million from 102 million and raising our F2012 iPad estimate to 56 million from 47 million, which drives the EPS increase."
With the announcement Apple's results for Q1 2012, investment analysts at Piper Jaffray (NYSE: PJC) boosted their price target on shares of Apple (NASDAQ: AAPL) from $607.00 to $670.00 in a note issued to investors on Wednesday.
These stock analysts go into a ridiculous frenzy everytime Apple announces stellar revenues and earnings. Now, just watch these punkasses short the stock like they did last year, and made a bundle on the downside.