Can Apple do it again?

Posted on January 26th, 2012

What kind of a financial blogger would I be if I didn’t write about Apple’s (AAPL) recent earnings release this week? It was a blow-out quarter rarely seen by any firm. They beat the consensus revenue number for the quarter by more than $7 BILLION. That’s 7 BILLION!! Less than 5% of all publicly traded firms even have $7 Billion of total annual revenue. Amazing.

Apple deserves all of the kudos they have gotten this week. They are a great company. The earnings blow-out was driven by impressive product sales. Apple designs and builds great consumer products that are loved by their users. We all know that the world loves the iPad, iPod, and iPhones. But the iMac and laptop numbers continue to impress also. More and more people are adapting the entire Apple eco-system as they surround themselves with Apple mobile products.

I have a running joke with my fellow blogger on Buy & Hedge about Apple’s future. If you are a fan of science fiction movies, then you know a lot of them have a consistent theme: some large company now controls the entire infrastructure of the Earth/galaxy/universe: the food, water, oxygen, robots, etc. The whole world is dependent on them. And usually that company has some plot twist that involves the CEO/founder/creator wielding too much power. I would argue that if that is our future here on Earth, more than likely Apple will be that company.

But let’s look at Apple’s more immediate future for a minute. Specifically, can Apple do this again? That earnings beat was so good that it seems that it would be difficult. First, let’s level set the expectations. The first quarter is the December/Holiday quarter which is always Apple’s best quarter because of the gift giving season.

The question is: can Apple have a blow-out that beats revenue or earnings or product sales numbers by the similar scope as just happened last quarter? In other words: $3+ billion revenue beat on consensus or EPS beat by 30%+ or product sales that are up 100% over the prior year quarter?

Seems unlikely for the next 3 quarters given the likely product push coming for Apple this year which I’ll speculate on in a minute. But could it happen again by the December ending quarter for 2012?

In 2012, I expect Apple to make 3 significant product pushes that I think will have a lot of potential:
  • New iPhone – that has 4G data and potentially thinner form factor
  • New iPad – that has 4G data and potentially faster processor and sharper screen
  • New Apple TV launch – in actual TV form or just new innovative set-top box

If all three of these things happen in 2012, then I could see Apple’s December 2012 quarter being a repeat of this last quarter. These three product pushes TOGETHER could be the impetus for a blow-out final quarter. These products will also continue to strengthen the already growing movement of conversion from Windows pcs to Mac computers.

Also, I expect the telecom providers to make a move to allow users to ‘combine’ data plans across devices to share a 4G plan; in other words, your 4G data usage would be calculated across your iPhone and iPad together. This will help make more users upgrade from earlier iPads and iPhones.

These launches will most likely be staggered through the year – which is why I don’t expect any one of these product pushes to cause a blow-out quarter on its own. But the combination of all three before the holiday season is another matter completely.

So, expect AAPL stock to have an interesting 2012 – and if these 3 product launches are as successful as I think they can be – expect history to repeat itself in earnings season in January 2013.


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