Is this the quarter Apple (NASDAQ:AAPL) finally fumbles?
That question has been preoccupying — and dividing — tech analysts as well as investors for the past several weeks. And on Wednesday, shortly after the market closes, the answer will be revealed.
Apple is not only the most closely watched technology stock these days, it’s the de facto bellwether for Silicon Valley. Its hardware measures the pulse of consumer and business spending in laptops and smartphones. Its software, including iTunes and its App Store, offers a window into applications and digital music.
Plus, it’s been one of the best managed tech companies of the past decade. Apple has mastered the art of the earnings surprise: Setting earnings guidance just high enough to be credible but just low enough to beat it by an impressive margin.
Even more impressive, analyst estimates are constantly falling short of Apple’s actual numbers. For the past eight quarters, Apple has consistently beaten the Street’s consensus estimate by at least 12% and by as much as 76%, according to Thomson Reuters.
For the quarter ended March 31, 2011, the mean of analyst estimate calls for Apple to see earnings of $5.36 a share, a 60% rise from the $3.33 EPS a year ago. Revenue is expected to rise 72% to $23.3 billion.
Fortune.com went further, gathering the analyst estimates for unaffiliated analysts, or what most people call financial bloggers. The bloggers have had a better track record of coming closer to Apple’s actual figure. This quarter, according to Fortune, their mean estimate for Apple revenue is $25.3 billion and their EPS estimate calls for $6.33 a share.
Those are the consensus numbers. But this quarter, there really isn’t so much consensus. Stifel Nicolaus analyst Douglas Reid cut his EPS estimate on Apple, citing weaker-than-expected iPad and iPhone sales. Goldman Sachs and Barclays also braced for weak earnings because of disruptions to Apple’s supply chain in the wake of the Japanese earthquake in March.
Rodman & Renshaw analyst Ashok Kumar said iPad sales could disappoint in the quarter because of cautious consumer spending. Another analyst looked at Apple’s own iPad sales figures disclosed in a lawsuit to echo that concern.
But others disagree, expecting Apple to have another blowout quarter. On Monday, JPMorgan analyst Mark Moskowitz raised his EPS forecast to $5.39 a share. Any disappointment in iPad sales, he wrote, would be more than offset by strong iPhone sales, thanks to the Verizon (NYSE:VZ) deal.
Mac sales could also be unexpectedly strong in the quarter. Thanks to the launch of the new MacBook Pro, sales of big-ticket Mac computers could be up 27% in the quarter, research firm NPD Group said Tuesday. Piper Jaffray added that those sales might be strong enough to help Apple push past the lowered expectations others have for the quarter.
Apple’s report will settle this debate. In general, however, it seems that the negative news – the disruption to Apple’s supply chain, the less-than-spectacular iPad sales – are priced into the stock. Apple’s stock closed Tuesday at $337.86, down 7% from its all-time high of $364.90. Before Wednesday’s broad market bounce, Apple was up only 4.7% this year, compared with a 6% gain in the Dow.
Any positive surprises about Mac or iPhone sales are less likely to be priced in. If there is any such good news up Apple’s corporate sleeve, the bar seems to be set rather low right now, and easy to jump over. That could make it easy for Apple to beat analyst estimates handily — yet again.