AAPL Fiscal 4th Quarter Revenue Estimate Preview

AAPL Fiscal 4th Quarter Revenue Estimate Preview
In late July I published an early fourth fiscal quarter estimate for Apple of at least $20 billion in revenue and earnings of $4.30 or more per share.

This weekend I did a more critical review of Apple's fiscal year 2010 performance through the June quarter and revised my ratios to reflect recent trends in Apple's financial performance. This post discusses the revenue component of Apple's fourth fiscal quarter results.

Apple's FQ4 '09 Revenue and Apple's Guidance for FQ4 '10
In the fourth quarter of fiscal year '09 Apple reported revenue of about $12.2 billion. In the June quarter conference call with analysts, Apple's management provided revenue guidance for the September quarter of about $18 billion in revenue or roughly a 47.5% increase in revenue year-over-year. This guidance is obviously conservative based on the company's revenue growth results for the first nine months of the fiscal year.

Apple's FY '10 Growth Rates To-Date
Apple's revenue growth rate for the first nine months of the fiscal year is 46.2%. This is not the number that suggests Apple's guidance is conservative. In the June quarter the Apple iPad contributed to 61.2% growth in revenue while Apple aggressively drained the global channel of iPhone supply ahead of the iPhone 4's release. Absent the iPad's revenue contribution, the year-over-year revenue gain for the nine-month period would have been about 39.1%. This is a respectable rate of revenue growth absent the Apple iPad.

How the iPad Influences FQ '10 Revenue Results
In the June quarter the iPad produced revenue of $2.166 billion, inclusive of 3.27 million units sold and iPad accessories sales. For the fiscal fourth quarter, a reasonable estimate of sales is 6 million units and estimated revenue of $3.975 billion. The iPad alone at 6 million units sold will produce a revenue gain of 32.5% over the prior-year period.

To put the iPad's importance to Apple's September quarter results in an appropriate perspective, one must consider in limited release the device represented 13.8% of the June quarter's reported revenue. At 6 million units sold the Apple iPad will represent between 18% and 20% of the September quarter's revenue results. This does not include revenue contributions from iPad-related iTunes sales activity.

Although available in limited release in the June quarter only, the iPad represents about 4.8% of Apple's reported revenue for the first nine months of the fiscal year and represents 7% of the revenue growth over the same nine-month prior-year period.




A Cursory Revenue Estimate
Assuming non-iPod revenue sources maintain the rates of revenue growth experienced in the first nine months of the fiscal year, revenue from these sources would rise to about $16.98 billion. Adding in the iPad revenue estimate produces a cursory revenue estimate of $20.954 billion for the September quarter and revenue growth over the prior-year period of about 71.7%. This would be a startling pace of revenue growth produced in large part by the Apple iPad which has no prior-year sales in the revenue comparison.
This approach to modeling revenue growth is obviously imprecise. Its best use is as a corroboration tool for revenue estimates based on more comprehensive analysis of anticipated September revenue results by product line and revenue segment.

A Few Factors To Consider Before Investors Pop The Champagne
For the first nine months of this fiscal year Macintosh unit sales have risen 33.2% and iPhone unit sales have risen 93.7%. Based on ASPs (average selling prices), each Mac sold has twice the revenue contribution of each iPhone and its related accessories sold, and just under twice the revenue contribution of each iPad and its related accessories sold.

In developing an accurate revenue estimate for the September quarter, and although on a unit basis both the iPhone and the iPad will significantly outsell the Mac, Apple's oldest and most enduring product line factors heavily into the results. 

Questions arise as to whether or not in the September quarter the Mac line will maintain the same unit sales growth rate experienced in the first nine months of the fiscal year. Similarly, questions arise as to whether or not iPhone unit sales in the September quarter will maintain the same rate of unit sales growth experienced from October through June.

Estimate Revisions
All factors considered, I will be revising my recent revenue forecast for the September quarter published last month and my estimate for FY '10 revenue published in May. As of today I expect Apple's September quarter estimate to exceed $20 billion in revenue and results that will surpass $65 billion in revenue for the fiscal year.

Robert Paul Leitao