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My investing philosophy mostly centers around the Value discipline and GARP- Growth at a Reasonable Price. This blog includes commentary on market conditions as well as fundamental analysis of specific companies. Graduated from Rhodes College with a degree in Business with concentration in Finance & Marketing. Currently working on obtaining the CFA designation. Previously worked in Mortgage Trading for a major bank. Use MS Excel extensively for developing investment models, notably valuation models based on DCF methods.

Monday, January 25, 2010

FA Estimates for Apple (AAPL) Q1 2010

Apple Inc. (nasd:AAPL)- Apple reports Q1 2010 results after the bell today, January 25th.

Below are my expected numbers:

Tailwinds Q1 2010:
1) Improving economic environment and consumer spending.
2) New iMacs released in October.
3) iPhone expansion into China, Korea, and additional carriers in current markets.
4) iPhone 3GS channel fill due to supply constraints in Q4.
5) Strengthening international demand for Macs, iPhones, and iPods.
6) iPhone “halo effect” benefiting Mac demand.
7) USD weakening should lift ASPs from sales abroad.
8) iPod sales mix shifting towards touch models should lift iPod ASP.

Headwinds Q1 2010:
1) Unavailability of higher priced iMac models in December.
2) GM pressure for shipping costs from iMac refresh.
3) Higher provision for warranty expense stemming from defective 27’ iMac units.
4) iPod product life cycle maturing, potential market nearing saturation, and cannibalization of iPhone/iPod touch demand.
5) Competition from low-price notebooks and netbooks resulting in MacBooks appearing to be much more expensive.

On balance, tailwinds were much more stronger than headwinds that Apple faced in Q1 2010. Thus, Apple should report an extremely strong quarter.

Disclosure: Long AAPL

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Email: gmail-turley.muller
Phone: (901) 213-8875