Q2 2013 - Gross Margin YOY make for a tough compare

On my last post, I said that Apple would report an EPS of $12.00 for Q2 2013. It turns out I was being optimistic again.

Last years Gross Margin was a stellar 47.4%.  I'm giving Apple an optimistic GM of 39.1%, which is a 17.5% decrease from last year. This fact alone will wreak havoc on the EPS.  My calculations have Apple's EPS at $10.39, which is a 16% YOY decline....

Compounding the tough compare is the tax rate, which last year came in at 25.19%  This year, I have Apple at an optimistic 25.71% which places additional downward pressure on the EPS.  My preliminary numbers are as follows:


Revenue - 42,226,400,000   +8% YOY
EPS - $10.39   - 16% YOY
GM - 39.1%  - 17.5% YOY


iPhone - 37,500,000   +7% YOY
iPad - 17,500,000      +48% YOY
iPod - 6,300,000         -18% YOY
Mac - 3,800,000         -10% YOY
Software / iTunes / other - $3,750,000,000  +154% YOY


With this YOY tough compare, it appears that Apple's growth has come to a screeching halt. Long term, this is not true, as I see the GM's staying in the 38% range, and the growth will show up again in the Q3 and Q4 quarters as the "tough compares" go away. (Albeit - a slow rate of growth)

My opinion is that Wall Street will brutalize the stock with these YOY results in Q2, and I see the share price dropping to 390. Hopefully, it stabilizes and starts the climb back up as seasonal product refreshments generate excitement.  I still see the share price at 511 come March 2014, with a strong showing in the fall and Christmas quarters, continuing into early 2014.

The Samsung/Android juggernaut coupled with Microsoft's recent innovative resurgence is muting the iPhone growth, as well as iPad's, but not to the degree of the iPhone.  I view Microsoft as a huge threat to Apple, (and Samsung) with their new and improved integrated operating system strategy amongst all platforms. The Nokia/MS partnership is looking like it will be successful.  I personally have checked out the new windows 8 operating system, and I see it as a winner from MS.  The fact that MS office can be integrated on all platforms easily just enforces their position.

More to come

I do not own AAPL shares.