Alex Cho
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Apple Earnings Expectations Seem Beatable

Expectations for Apple earnings is quite low going into earnings tomorrow. The only differentiating factor to this quarter is perhaps F/X and the degree to which Apple reduced inventory in the sales channel. Assuming Apple burned its inventory in the channel and reduced the amount of sell-in, Gene Munster at PiperJaffray anticipates the impact to be 2-3 million units different from the reported figure. In other words, Apple will technically sell more to the end-consumer than actually reported, but the number of units sold to retailers (where revenue recognition actually occurs) will be somewhat lower. I believe Apple could potentially surprise on gross margin assuming Apple’s management was implying around 3% in negative F/X headwinds. I believe the impact of F/X will be less significant thus implying gross margin figures that could prove slightly above expectations.

Anyhow, there’s not a whole lot of hype going into earnings. So, it’s really hard to imagine how Apple will mess all of this up. I'm expecting Apple to report revenue of $42.398 billion and EPS of $1.46 in the upcoming quarter. Both of my assumptions are above consensus. I continue to reiterate my buy recommendation.