The biggest news item this week was Apple reporting its March quarter results and giving June quarter guidance after the market close on Tuesday. Investors were expecting results and guidance to be on the weak side but both were below expectations. Combined with Carl Icahn saying on CNBC on Thursday that he had sold his shares the stock was down significantly this week. (Note that I own Apple shares).
Stock moved back into Bear market territory
Apple’s shares were down $11.94 to $93.74 or 11.3% for the week ($9.52 or 9.1% after it announced its March quarter results and June quarter guidance) vs. the S&P 500 down 1.3% and the NASDAQ down 2.7%. It is down 29% from its all-time high.
March quarter results and June quarter guidance were disappointing
Apple reported March quarter revenue of $50.6 billion, down 13% year over year vs. guidance of $50 to $53 billion and the Street’s $52 billion (I was at $51.8 billion). EPS of $1.90 was below the Street’s $2.01 (I was at $2.00) and at the low-end of Apple’s guided range of $1.87 to $2.05.
Probably the biggest disappointment in Apple’s announcement was the June quarter revenue guidance of $41 to $43 billion. This was significantly below the Street’s published estimate of $47.3 billion even though almost every analyst was “talking” that number down before it was announced. Based on June quarter revenue guidance that would make iPhone unit sales of about 42 million in the quarter vs. 47.5 million in the June 2015 quarter.
The guidance is being impacted by a $2 billion channel inventory reduction but it still would have fallen short of expectations. I estimate that iPhone channel inventory will decrease by about 3 million units if the end user price of about $650 is used (but it could be over 5 million units if the $2 billion is based on Apple’s cost to make an iPhone assuming a 45% gross margin). This does make the iPhone outlook a bit more palatable.
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