Earnings Breakdowns
AAPL:
Apple, Inc. (AAPL) is slated to report 4Q 2018 earnings after the bell on Thursday, November 1st. The earnings release is expected at approximately 4:30 p.m. ET with a conference call to follow at 5:00 p.m. that is webcast through Apple Investor Relations. Aside from Apple, look to the major US equity index futures, ETF’s, component providers, and competitors to move off of the upcoming results.
Outliers & Strategy
Key measures:
- Earnings Per Share (EPS): Apple normally reports a “clean” number for comparison. The current Street estimate is $2.78 (range $2.65 to $2.90) (Source: Yahoo! Finance). Consensus was $2.65 three months ago.
- Revenues: Company guidance is for $60 bln to $62 bln. Analysts expect a 17.1% increase y/y to $61.59 bln. Consensus was $59.57 bln three months ago.
- Gross Margin: Company guidance is for 38.0% to 38.5%. (Press release only gives dollar amount to be divided by sales for the percentage.)
- iPhone Shipments: JP Morgan expects 46 mln. Most of the focus is on the holiday qtr.
Revenue Guidance:
- 1Q 2018 Revenue Guidance: Analyst consensus is a 5.3% increase y/y to $93.01 bln (range $84.01 bln to $100.93 bln).
- Apple’s trailing P/E of 19.6 compares to a five-year average of 14.1; Price/Book of 9.1 compares to a five-year average of 4.8; Price/Sales of 4.3 compares to a five-year average of 3.1; Price/Cash Flow of 15.1 compares to a five-year average of 10.1. Dividend yield of 1.3% compares to a five-year average of 1.8%.
- Analysts view Apple with 27 Buy, 18 Hold, and 3 (1 last qtr) Sell ratings. (source: MarketBeat.com)
- Insiders sold 1,127,039 shares in the last three months and 1,958,480 shares over the past year (source: NASDAQ.com). In May 2018, a $100 billion stock buyback program was announced following $210 billion since 2016.
- Apple shares have a 1-day average price change on earnings of 3.83%. Options are pricing in an implied move of 5.97%.
Recent News
- 10/29: Apple is holding a second event tomorrow to announce new versions of its gadgets ahead of the holiday shopping season and is expected to unveil an updated iPad and Mac, according to a post on theguardian.com.
- 10/29: JP Morgan’s forecast is for 46 million iPhone shipments in the quarter which may help drive overall revenue to $62.3 billion, slightly above the $60 billion to $62 billion guidance range, according to a post on appleinsider.com.
- 10/28: Apple’s slightly less-expensive XR at $750 becomes available this Friday and is just as fast and nearly as capable as its more expensive counterparts, according to a post on Barron’s.com.
- 10/22: TF Securities analyst Ming-Chi Kuo notes iPhone XR pre-order demand is outpacing the sales of iPhone 8/8 Plus from last year and bumped up his total iPhone sales estimate from 75m-80m up to 78m-83m for the holiday quarter (that’s still below the 80-83 DigiTimes anticipated before the XS and XR were released), according to a post on 9to5mac.com.
- 10/22: Bernstein notes search ads in the App Store are worth about $500 million right now and could reach $2 billion by fiscal 2020, according to a post on Barron’s.com.
- 9/16: Possibly later this year, the hoped-for AirPods 2 with Siri integration and be much more waterproof will be announced, according to a post on inverse.com.
- 9/13: Goldman Sachs reiterated a Neutral rating for Apple and cut its fiscal 2019 profit estimate to $13.77 from $14.53 citing the new iPhone XR entry-level version phone was priced at $749 versus the $849 estimated, according to a post on CNBC.com.
- 9/12: Apple’s iPhone event announced the 3 new phones and watch as expected. Gartner and KeyBanc Capital Markets believe the $1,099 6.5-inch XS Max iPhone could push Apple past leader Samsung Electronics as the No. 1 vendor, according to a post on Barron’s.com.
- 9/07: Apple says China tariffs would hit Apple Watch, Air Pods, according to a post on CNN.com.
- 9/06: Apple’s Takeover of Shazam Is Cleared by European Regulators, according to a post on nytimes.com.
- 8/29: Apple CEO Tim Cook has taken advantage of the company’s soaring share price and cashed in $121 million worth of stock awards, according to a post on Businessinsider.com.
- 8/27: Apple plans to launch three new phones soon with the iPhone X design with new colors and bigger screens as expected by analyst Ming-Chi Kuo two months ago, according to a post on Bloomberg.com.
- 8/16: Apple probed in Japan over anti-competitive behavior, according to a post on Nikkei.com.
- 8/16: Hedge fund manager Dan Niles is worried the China trade war could hit the iPhone maker’s bottom line and shock investors who are capitalizing on its record run, according to a post on CNBC.com.
- 8/14: TF Securities analyst Ming-Chi Kuo predicts Apple could launch glasses in 2020, Apple Car in 2023, according to a post on Businessinsider.com.
- 8/13: Apple is delaying group FaceTime calls, one of the most-anticipated features in the next iOS, according to a post on Businessinsider.com.
Summary
As expected, Apple announced their new iPhone XS, XS Max and XR, and the Apple Watch Series 4. They will continue to sell the iPhone 7 and 7 Plus, 8 and 8 Plus, starting at $449. Possibly later this year or even tomorrow, the hoped-for AirPods 2 with Siri integration and be much more waterproof will be announced. There has been no mention of its long-delayed wireless charging pad. Slowing demand for high-end phones has been a worry among analysts. China’s devaluation could impact sales there. The XR phone is seen helping holiday sales next quarter, however. Increased stock buybacks have helped support the stock price, so valuations remain high despite the expectation for slowing of revenue growth to single digits in 2019. Insider selling ramped up the past three months led by Tim Cook. Analysts show a couple turned bearish since last quarter. The company has beaten earnings estimates by an average of 11c the previous four quarters. Estimize consensus for an EPS of $2.82 on revenue of $61.838 bln compares to analyst consensus of $2.78 on revenue of $61.59 bln. iPhone shipments will be less important than revenue guidance given the focus on next quarter’s holiday sales.
$FB
Facebook, Inc. (FB) is slated to report 3Q 2018 earnings after the bell on Tuesday, October 30th. The actual results are expected to come through at approximately 4:05 p.m. ET with a conference call to follow at 5:00 p.m. available at Facebook Investor Relations. The social networking company is a component of the S&P 500 and NASDAQ 100. Shareholders approved a 3-for-1 split for Facebook stock split on June 20, 2016 but that proposal was withdrawn in favor of issuing a new class of non-voting shares.
Outliers & Strategy
Key measures:
- Non-GAAP Earnings Per Share (EPS): Analysts expect $1.47 (range $1.17 to $1.96). (Source: Yahoo! Finance) Consensus was $1.51 three months ago.
- Revenues: Analysts expect an increase of 33.4% y/y to $13.78 bln (range $12.25 bln to $14.25 bln).
- Monthly Active Users: Four qtr average growth of 13.6% y/y would be 2.352 bln but growth has slowed the last five quarters in a row.
- Daily Active Users: Four qtr average growth of 13.6% y/y would be 1.557 bln but growth has slowed the last six quarters in a row.
- Facebook’s P/E is 22.5; P/B 5.3; P/S 8.8; P/CF 15.3. Given slower expectations for revenue growth, a Price/Sales would have to get down to 5 to become attractive for value investors.
- Analysts view of Facebook with 41 Buy, 5 Hold, and 2 Sell ratings. (source: MarketBeat.com)
- Insiders sold a net 1,913,568 shares in the last three months but bought a net 833,055 shares in the past year. (source: NASDAQ.com)
- Facebook shares have a 1-day average price change on earnings of 5.55%. Options are pricing in an implied move of 9.11%.
Recent News
- 10/29: Bank of America expects Facebook management to remain cautious after some ad buyers expressed concern about Facebook’s ad sales, which account for 98% of its total revenue, according to a post at Barron’s.com.
- 10/03: Facebook faces $1.6 billion fine as top EU regulator officially opens probe into data breach, according to a post at CNBC.com.
- 10/03: Three in four Facebook users say they’ll take action over the latest hack, according to a post at businessinsider.com.
- 9/18: JP Morgan reduced its Facebook 2019 earnings per share estimate to $7.40 from $7.89 citing higher expense spending. The company previously warned of lower future margins due to increased security and content review expenses, according to a post at CNBC.com.
- 9/12: Facebook could be affected by the EU’s new copyright directive, according to a post at CNBC.com.
- 9/10: Facebook animal trade exposed in Thailand, according to a post on bbc.co.uk.
- 9/06: Facebook to invest $1 billion in first Asian data center in Singapore, according to a post on Reuters.com.
- 9/05: More than 1 in 4 Americans have deleted the Facebook app in the past year, according to a new survey, according to a post on Businessinsider.com.
- 8/29: Facebook’s Watch video-streaming service is rolling out worldwide, just over a year after its US launch, according to a post on BBC.com.
- 8/27: German antitrust watchdog plans action on Facebook this year (not monetary as with EU), according to Reuters.com.
- 8/22: Piper Jaffray maintained an Overweight rating on Facebook citing that users ‘don’t seem to care’ about data scandal, fake news, according to a post on CNBC.com.
- 8/13: RBC Capital Markets suggests investors overreacted after Facebook missed estimates on daily active users and warned on forward guidance which has made the stock the ‘most appealing risk-reward’ stock in tech. Upcoming monetization of Whatsapp and Facebook Messenger opens up a huge opportunity for profit, according to a post on CNBC.com.
- 8/07: Facebook has denied reports that it is actively asking banks for details of users’ financial transactions, according to a post on BBC.com.
Summary
Facebook got hacked and 50 million accounts were compromised. Facebook reset the accounts of another 40 million users as a “precautionary step.” Facebook’s stock has struggled since the last earnings release but could rally back into the $180-190 area to make a head-and-shoulders topping formation. European regulations limited what Facebook could do with user data and now a new copyright directive may produce another issue. Analyst bullishness remains impressive despite their slowing growth expectations. Instagram, Messenger, and Facebook Watch are expected to drive Facebook’s next growth spurt. Advertising revenue growth is still over 40% but slowed from 50% in Q1. The lack of teen interest is similar as with Twitter and that continues to be a worry. Insider selling spiked the last three months which is always a worry amid weakness but the stock came off all-time highs. The company has beaten and missed estimates by an average of 4c the past four quarters. Estimize consensus for Non-GAAP EPS of $1.55 on revenue of $13.927 bln compares to analyst consensus of $1.47 on revenue of $13.78 bln. Traders also focus on the “user” data which has shown slower growth the past year.