Apple Inc. (AAPL) plans to conduct a conference call to discuss financial results of its fourth fiscal quarter on Monday, October 28, 2013 at 2:00 p.m. PT / 5:00 p.m. ET.
Wall Street anticipates that the smartphone and tablet maker will earn $7.89 for the quarter. iStock expects the NASDAQ 100 member to smash Wall Street's consensus number. The iEstimate is $8.22, a 33 cent upside surprise.
In case you were born yesterday, Apple, manufactures, and markets mobile communication and media devices, personal computing products, and portable digital music players worldwide. Its products and services include iPhone, iPod, iMac, iTunes and more.
Lately, Apple has struggled to live up to earnings' expectations, missing the mark three of the last five quarters. Prior to that, the tech titan smoked the consensus 10 of 11 quarterly checkups, by an average of 33%.
Expectations are running high heading into Monday's announcement. Ten analysts have upwardly revised their estimates within the last 30 days, and two upped their outlook in the last week.
Apple management set the table for rising hopes announcing, "[Apple] sold a record-breaking nine million new iPhone® 5s and iPhone 5c models, just three days after the launch of the new iPhones on September 20 [2013]." Recently, Team iPhone quietly backed off their out-of-the gate enthusiasm with the 5C.
Management continued to beef-up expectations following the iPhone 5S & 5C news by guiding their outlook for fourth-quarter revenue to the high end of its estimates, around $37 billion with gross margins near the high end its forecasts, too: key word – Gross.
Morgan Stanley's Katy Huberty believes gross margin will come in at 38.7%, which would be up from last quarter's 36.87%.
Where margins come in will depend on the mix of various iPhone models sold. iStock has a sneaky suspicion the mix might not be as profitable as hoped for as we turned to Google Trends for clues, once again.
iPhone 5S might be selli! ng like hotcakes, but search volume intensity just isn't there. Web queries for iPhone 5S peaked at 35% of iPhone 5's max score. In fact, current trends show as much interest in the iPhone 5 as the 5S. Perhaps, the shortfall can be chalked-up to the upgrade cycle, and current users just didn't feel the need to Google for more info?
And then, when you consider that Apple's inventory more than doubled year-over-year in the third quarter, it is not so hard to connect the dots and make the case that the company moved a lot of older merchandise out the door. While the impact might not be felt on gross margin – those phones are already built, and the cost accounted for – it certainly could influence net margin.
With expectations running high, any hiccup could be unwelcome news for the stock price and the company's credibility. Apple shares fell three of the four times EPS didn't live up to the street's outlook, dropping an average of 4.4% in the three days surrounding the profit announcement. This time, beating the mark might not be enough to overcome the per-news hype. Just ask Netflix (NFLX).
Overall: iStock has some concerns that the bar for Apple Inc. (AAPL) might be a little too high. The difference between a pop or drop is likely to boil down to net margin. Let's just hope Google Trends and bulky inventory are false flags.
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