AAPL FY2011 Estimates and Forecasts
In late July I posted a preliminary Apple FY2011 revenue forecast of $100 billion. Following the September quarter results I'm beginning my first set of estimate revisions. In reviewing my unit sales numbers following the September quarter I've become more emphatic about my current AAPL price target of $450 per share. I will be revising my revenue and earnings forecasts for FY 2011 over the next two weeks with a bias toward increasing the revenue forecast. Below are the factors by product line that are influencing the outcome of my work:
Mac Unit Sales
In FY 2011 I expect Mac unit sales growth to moderate from the 31% growth rate in FY2010. I expect Mac sales to growth a rate at least 2x the pace of growth of the industry. In fact, I expect Mac PC unit sales growth to represent more than 50% of the growth seen in the domestic market.
In my view tablet products such as the Apple iPad will force a continued deceleration of PC industry growth in the domestic market and increasing revenue share of all PC sold for Apple. Rising enterprise adoption, aggressive product pricing and Apple's efforts at refreshing the Mac product lines more frequently are counter-weights to unit sales growth falling below 25% for the fiscal year. I expect Apple to at least maintain its current 20.7% share of consumer PC sales in the domestic market.
iPod Unit Sales
In the 4th fiscal quarter of FY2010 both unit sales and revenue for the iPod line fell below prior-year levels. I expect this trend to continue into FY2011. For now I anticipate a 10% to 12% fall in unit sales for the fiscal year with the iPod touch partially offsetting a commensurate fall in revenue from the line.
iPhone Unit Sales
To the surprise of all analysts, iPhone unit sales growth in the September quarter roughly matched the pace of growth for the first nine months of the fiscal year. I expect this strong pace of 90% growth in unit sales to continue through FY2011. Apple ended the September quarter with only 3.2 million iPhones in the global channel, representing about 2.5 weeks of expected unit sales in the quarter. As supply reaches demand, the FQ1 numbers will benefit from an increase in channel supply as Apple exits the quarter with more iPhones in the channel than when the quarter began.
iPad Unit Sales
iPad unit sales are an enigma. The September quarter's 4.188 million units sold was underwhelming and the benefit of supplying to 10,000 or so points of domestic purchase for the holiday quarter will be fully realized in the December quarter. There's no doubt the holiday quarter's iPad sales will be far above what's was reported in the June and September quarters and one could reasonably suggest the December quarter iPad unit sales will meet and exceed total unit sales through the end of the September quarter. The Apple iPad is the revenue segment that will most influence Apple's revenue and earnings gains over the FY 2010 performance.
Other Revenue Segments
In FY2011 I expect reported revenue from iTunes activity to rise at least 25% from prior-year levels. There's no denying the revenue gains to be realized as more iOS-based devices are purchased and both more sophisticated and more expensive apps come to market. Sales of Mac OS X apps through iTunes will benefit revenue growth for this revenue segment.
We may not see any revenue benefit from Mac OS X, 10.7 "Lion" sales in FY2011, but the increasing size of the Mac installed base will benefit sales of iLife 11 and move growth in the Software, Services and Other Sales revenue segment above the 6.8% pace of FY 2010.
The Peripherals and Other Hardware segment will experience revenue growth above the 23% pace of FY2010. This is due in part to the refresh of the Mac Pro line of workstation PCs and continuing growth in Mac sales well above industry averages.
Over the next two weeks I will be revising my FY 2011 revenue and earnings forecasts and mostly likely raising FY revenue estimates above my July forecast of $100 billion in revenue. For the first fiscal quarter of 2011 that ends in late December, I anticipate revenue at or above $25 billion and eps at or above $5.50 per share.
Robert Paul Leitao