Tomorrow afternoon (Pacific time) Apple will hold a crucial earnings call—Q1 2013—which for Apple’s fiscal year means October–December 2012. This is both the holiday quarter and the first full quarter that the iPhone 5 has been available. With Apple stock teetering below $500 a share, concerns about the growth of the smartphone market, supply and production rumors, and everything else that we’ve heard rumored lately about Apple, analysts are more that a little jittery this morning. And it has nothing to do with drinking too many triple-shot Americanos to start the day.
This morning the financial news sites are all posting some variant of this message: Apple is expected to reveal a small dip in profits and growth tomorrow. Growth in smartphones is slowing. We can’t figure out what Apple is going to do next that will blow our minds and it scares us.
Culled from various analyst reports, Bloomberg thinks Apple may see profits drop for the first time in a decade. A 2% drop. A 2% drop to $12.8 billion. Forbes quotes UBS analyst Steve Milunovich putting profits in FY 2013 down to $44.68 a share (down from $47 he predicted earlier), but still keeps Apple as a “buy rating”. Similarly, 52 of the 63 analyst covering Apple still have Apple as a stock to buy (9 hold, 2 sell).
Essentially The Street is nervous. Apple is still the most valuable company in the world (even with its recent stock dip), but The Street doesn’t like uncertainty. They don’t like the fact that Apple won’t tell them what’s on the drawing board for the next year or so. Apple doesn’t play that game. Apple is also well-known for conservative earnings guidance. Something that has served it well when it kept blowing those estimates out of the water, today those estimates might be closer to reality and that scares The Street.
The fact remains that Apple is still selling millions of iPhones and iPads. People are still buying tons of apps and music through iTunes. Profit margins on Apple devices might be tightening, but they are still healthy. Honestly, Apple couldn’t keep blowing away Street estimates forever, reality has to come into play eventually.
But here’s something interesting, a reality check if you will, about Apple’s previous record of record growth. If Apple kept up the pace of hyper growth it enjoyed for that last five years for another five years revenue would hit $1.2 trillion. That, by the way, is the GDP of Australia and close to the GDP of Canada. So, realistically, you can’t be a single company and have revenues greater than the GDP of a G20 or G8 nation. It just doesn’t work like that.
We’ll all find out at 2PM Pacific time tomorrow what Apple’s earnings for Q1 2013 were and if analyst jitters today will make them all look like nervous nellies tomorrow.