Per Bloomberg, last Thursday’s report “marked the first time since 2013 that Google has announced quarterly adjusted earnings per share higher than expectations.” The market responded accordingly, rallying Google’s stock to an all-time high of $699.62 (a 16% increase), and provided 39 points of the Nasdaq Composite Index’s 47-point gain for the day. As Walter Todd, CIO of Greenwood Capital Associates LLC puts it, “It’s a good feeling. The move in market cap is just insane.”
Now investors are wondering… can Apple repeat the same magic Google performed?
Once the market closes today, Apple is going to report earnings for its fiscal Q2 — the period covering April, May and June. Almost all signs point to a no. To understand why, take a look at this Fortune article. More specifically, these two lines…
Google’s rally was sparked by quarterly earnings that beat Wall Street expectations for the first time since 2013.
Apple’s earnings have exceeded the expectations of Fortune‘s panel of Wall Street analysts eight quarters in a row.
What happened with Google was an anomaly. But with Apple, anomalies happen so frequently that it becomes normal — Apple is expected to outperform the expectations of Wall Street analysts anyway. So even if Apple exceeds their expectations today, it’ll just be another normal, boring earnings report.
BUT… there are a couple things that could push Apple’s stocks up today (albeit not as much as what happened with Google) … and these are the numbers investors are looking at closely.
iPhones: Apple is now an iPhone company. Revenue generated from everything else they do and sell are nothing more than rounding errors for the company.
Analysts are expecting Apple to sell 49.4 iPhones this quarter — a 40% growth (!) annually on a quarterly basis.
Apple should have no problem beating these expectations: since the release of the iPhone 6 and iPhone 6 Plus, Apple has blown all demand and delivery expectations out of the water. In fact, if Apple can prove that there’s still a strong demand for the current generation iPhone 6 and iPhone 6 Plus before the newer generation comes out sometime in September, it has the potential to positively affect Apple’s stock price even more.
The entire iPhone line is quite a miracle: it’s a $154 billion business that not only has the potential to, but does grow 40% annually without ever having to lower its profit margins. A report recently emerged highlighting Apple’s insane profit margins on these iPhones: even though the company only has 20% of the sales in the smartphone industry, it’s taking 92% of the profits.
Apple Watch: Apple’s newest product line went on sale at the end of April, which means that Apple will have to report earnings on it for the first time ever.
Due to competitive reasons, Apple will not report its Watch sales as an independent category, and instead will lump it with all the “other products”. The “other products” category is usually comprised of iPods, Apple TVs, Beats Electronics, and other accessories.
All the “other products” did $1.7 billion in revenues last quarter — it’s up to the analysts to figure out how much of the difference this quarter versus last quarter in the “other products” category is due to the Watch sales.
This is what revenues from the “other products” category currently look like (via QZ)…
The Watch is an entirely new product line for Apple, which means one thing: analysts really don’t know what to expect.
So here’s how they’re going to decide if Apple is performing well on the Watch sales or not: if revenues for the “other products” are much higher for this quarter than it was for last quarter, then Apple crushed it. If revenues are the same or only experience a slight bump, then Apple bombed it.
Indicative measures: These are the usual big numbers everyone is paying attention to that will indicate if Apple is doing well or not (via B.I.)…
- Revenue: $49.22 billion, via Yahoo Finance (would be growth of 31.5%)
- EPS: $1.80, via Yahoo Finance (would be growth of 41%)
- iPhone units: 49.4 million, via Fortune (would be growth of 40%)
- Gross Margin: 39.5%, via Gene Munster of Piper Jaffray
- Revenue guidance: $50 billion, via Gene Munster of Piper Jaffray
Everyone will be able to listen in on Apple’s post-earnings conference call with analysts at 5 p.m. ET (2 p.m. PT) today. Here’s the link.