Saturday, May 15, 2010

Apple's $65 Billion Fiscal Year

I'm working on my preliminary estimates for Apple's FQ3 performance and my estimates for the balance of Apple's FY 2010 that ends in September.
For the June quarter my estimates suggest Apple will report the highest revenue and earnings per share for any quarter in the company's history. This is due to the emergence of the Apple iPad and the possibility Apple will ship three million or more units of this new digital device before the end of June. 
Further, the fourth fiscal quarter will again set records for revenue and earnings per share due to the continued global rollout of the Apple iPad and the expected release of the fourth generation Apple iPhone at the start of the quarter. In total my estimates suggest Apple will reach $65 billion in revenue in FY 2010, a 50% increase in revenue over the prior fiscal year. For the first six months of this fiscal year Apple has reported revenue growth of roughly 40%. I expect revenue growth momentum to accelerate during the June and September quarters.
While information on iPad ASPs may not be available until Apple releases its June quarter results, my estimates on pricing suggest Apple iPad's ASP will at least slightly exceed the ASP for the Apple iPhone. In other words, for purposes of estimating revenue, on average each Apple iPad sold has a revenue value equal to or greater than the value of each iPhone sold. The Apple iPad alone may account for 20% revenue growth in the quarter versus the prior-year period.
For the first six months of FY 2010 Apple has reported earnings per share growth of about 63%. Earnings per share growth may also accelerate in the June and September quarters.

The pace of Apple's revenue and earnings growth for the balance of the fiscal year will support appreciation in the share price even if the p/e multiple remains constant. I expect AAPL to reach $300 per share by the end of July and reiterate my forecast AAPL will reach $400 per share by early May 2011. 

Robert Paul Leitao


  1. Don't you think this mess in Europe will effect earnings?

  2. Sam:

    I don't expect the challenging events in Europe to have a material impact on Apple's performance this fiscal year. Apple's rates of revenue and earnings growth for the balance of the fiscal year will be influenced far more by the success of the iPad rollout than any particular economic event or series of events in Europe, Asia or the United States.

  3. The European issue I believe more affects government spending than consumer spending- and just for a handful of countries. That could spill to consumer, especially on the bottom on the income scale, but I don't foresee that affecting Apple. What is an issue is the plummeting Euro. That will hurt revenue and margins if Apple decides to to raise pricing.

  4. I like your analyses. AAPL does seem to follow the direction of the DOW, albeit with somewhat higher beta! So, my Q is: what do you project short/long-term for the DOW and , hence, Apple's performance??
    Thanks, DT


  5. When do you forecast AAPL will hit the $450 a share mark (will this happen by end of 2011) ?

  6. Bunratty:

    That's a good question. I stay away from forecasting short-term movements in the Dow. Over the longer term (two years) I expect the DJIA and other major market indexes to move higher. For now there's little opportunity cost for investing in equities due to extraordinarily low interest rates and real estate prices remain under pressure Further, corporate earnings are beginning to rebound.

    Within two years I expect the Dow to be at more than twice its early 2009 lows and move above 13,000. For Apple I expect the company's rates of revenue and earnings growth to influence the share price more than broad market movements but a dramatic move higher will expand the p/e multiple at which Apple trades. However, I caution against future valuation expectations that exceed 25 times anticipated trailing 12-month earnings.

  7. Anonymous:

    I anticipate Apple moving above $400 per share by May of 2011. A forecast for the share price moving above $450 or at least the timing of a move above $450 will be contingent on revenue and earnings growth for the June and September quarters of this fiscal year. I'm not quite ready to make that forecast now. The top of the price range for my current 12-month forecast is $440 per share.

  8. "For the June quarter my estimates suggest Apple will report the highest revenue and earnings per share for any quarter in the company's history."

    -Turned out to be barely the highest revenue quarter but not the highest EPS quarter.

  9. Anonymous:

    The 3rd fiscal quarter was $.16 shy of an eps record for two reasons:

    Chronically constrained iPad supplies during the quarter

    An aggressive drawdown of 3GS iPhone inventory in the quarter

    Both of these factors pushed product sales into the 4th fiscal quarter and will assist in pushing revenue to $20 billion and well over $4.00 per share in earnings.