Apple Q4 2012

Apple Inc. (NASDAQ:AAPL)’s FQ4 is expected to deliver in line results, according to the latest earnings preview by Jefferies & Co analysts, Peter Misek, Jason North, and Billy Kim. The equity research firm’s analysts reiterate their initial estimates for the quarter, of 26 million units of iPhone sales, while opting for a conservative guidance for the next quarter CQ4.

The analysts are optimistic that Apple Inc. (NASDAQ:AAPL) will notch nearly $60 billion in sales, or $17.44 earnings per share as compared t0 the consensus estimate of $55 billion or $15.58 EPS. Additionally, the analysts believe that the forecast iPhone sales for CQ4 has risen from the initial 55-60 million units, to 60-65 million units, thereby eliminating initial fears.

The analysts are of the opinion that Apple Inc. (NASDAQ:AAPL) is producing and selling at least 500,000 iPhones per day, and has registered sellouts in the 31 countries where the new iPhone has been launched, with statistics indicative of 3-4 week delivery periods.

The company’s gross margin is expected to grow by 3 percentage points, from about 40.9% to over 43.9%, as compared to the EBIT margin, which will grow by at least 6 percentage points, from 30.7% to 37%. The slight growth rate in gross margin is indicative of the significant increase in the cost of BOM, as compared to other cost drivers.

iPad Mini Bill of Materials (BOM)

The new iPad mini, which the analysts believe will be launched next week, October 23, has a majority of its bill of material costs concentrated in display features, with the LCD Display Panel costing $40. The whole display costs a total of $65, or about 30% of the total BOM cost to the iPad maker.

The total BOM is estimated to be about $206, while the average selling price per unit of the iPad mini is estimated to be $300. This results in a gross margin of about 31%.

Stock Price Movement Post iPhone Launch

Apple Inc. (NASDAQ:AAPL) stock has statistically, shown negative response to iPhone launches over the last three refresh seasons. The company’s stock has plunged approximately 5% following an iPhone launch within the first five days. Notwithstanding, while the iPhone 4 and 4s versions were followed by some lean recovery within 15 days of launch, the statistics depicted following the launch of the current iPhone 5 indicated a continuous slump for Apple Inc. (NASDAQ:AAPL) stock.

Between 15 and 30 days, there is no relationship in stock performance between the two post launch periods of iPhone 4 and 4s. The only similarity can be drawn from the 60 day period to 90 days, which indicates a tremendous recovery of the stock. Ninety days after the launch of iPhone 4, the stock recorded 17% rally, while 90 days after iPhone 4S launch the stock was up 9%.

The lackluster performance exhibits the negative reviews and evaluations that tend to accompany the launch of every new iPhone. Jefferies & Co. analysts point that the iPhone 4 was met with what was known as “antenna-gate,” the controversy relating to the metal band surrounding the iPhone that caused interference when making or receiving calls.

With regard to iPhone 4S, many felt the phone was a very slight incremental upgrade from the iPhone 4 and had no distinguishable new features, aside from the addition of Siri, which otherwise, had its critics complain about the accuracy, responsiveness, and question the usefulness. Additionally, the iPhone 4S battery was also on the receiving end for all the wrong reasons.

The iPhone 5 could not avoid such attacks as it fell short of market standards with its ambitious shot at maps, with an attempt to challenge Google. Its camera was also recently, criticized over purple flare, while its compatibility with some devices has also been questioned, as the company did not manufacture an adapter to help connect other devices to iPhone 5’s smaller port.

If that trend is repeated, this means that by January 2013, Apple Inc. (NASDAQ:AAPL) stock is likely to have recovered a majority of its lost value. This is no surprise, as it coincides with the company’s FQ1, earnings release, which according to analysts estimates, is expected to outperform market consensus.