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Apple: What's Up With iPad Sales?

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Apple reports earnings after the close today, and it's time to look at expectations.

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I woke up on the wrong side of the bed so I'm having a hard time coming up with a snappy opening, so I'll leave it at this: Apple (NASDAQ:AAPL) will deliver its fiscal first-quarter earnings report after the close, and it's a really big deal.

Let's take a quick look at where expectations stand:

  • The Bloomberg consensus calls for EPS of $14.07 on revenues of $57.5 billion.
  • That revenue number is at the high end of the $55-58 billion guidance issued last quarter.
  • The crowdsourced consensus from Estimize indicates traders are expecting earnings of $14.37 per share on revenues of $57.9 billion.
  • iPhone sales are expected to come in around 55 million, implying 15% year-over-year.
  • iPad sales are expected at around 25 million, growing 10% year-over-year.
  • The stock is up 4% since the fiscal Q4 earnings report, and up 18% from when the company guided up for Q4 on September 23, 2013.

Now, while the semi-official iPhone "consensus" is 55 million as shown above, it's safe to assume the Street wants more.

The opening weekend sales pop was huge, the phone was universally loved by critics, there were inventory shortages, and there's simply a large volume of positive anecdotes from people who may or may not know what they're talking about.

Therefore, I'd assume the only possible negative expected outcome regarding the iPhone unit is perhaps some unwanted 5C units getting stuck on the shelves.

To keep the stock going higher, a number in the 56- to 58-million-unit range may be required, and that seems reasonable.

The high end of the Google (NASDAQ:GOOG) Android market has been stagnant at best, as judged by the wavering momentum at key Apple rivals Samsung (OTCMKTS:SSNLF), HTC (TPE:2498), and Motorola (which is owned by Google).

Elsewhere, Nokia (NYSE:NOK) just reported a big drop in sales of its Lumia smartphones, so it's likely Microsoft's (NASDAQ:MSFT) Windows Phone OS just halted its market share gains.

The iPad is a bit tricker.

The consensus is calling for growth of about 10%, which seems extraordinarily low, but the unit was flat last quarter, and actually fell by 14% the quarter before that, as you can see in this chart:



And Apple's not quite at the point where it's facing easy comps in iPads -- in fiscal Q1 2013 (last December quarter), units rose 48%, benefiting from the launch of the fourth-generation model.

So I would say the iPad is the swing factor here.

I'm cautiously optimistic given the superiority of the product and the fact that it's been a full year since the last upgrade cycle, but you never know -- especially since the iPad Mini w/ Retina was priced high at $399.

But not everyone shares my sheepishness. Sean Udall, who authors Minyanville's TechStrat report, is quite bullish on the iPad number, as noted in last week's webinar, which you can view here. He's looking for over 27 million iPad units, and sees manufacturing constraints as the only reason there could be a disappointment here.

Twitter: @MichaelComeau

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Position in AAPL,MSFT
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