On July 20th Apple reported its results for the three-month period ended June 26, 2010. During the fiscal quarter the company had revenue of $15.7 billion and earnings of $3.25 billion or $3.51 per diluted share. Apple’s revenue for the quarter set a new company record and earnings were only $.16 per share below the record set in the three-month period ended in December.
Apple’s record revenue was due in part to the release of the Apple iPad which contributed materially to the quarter’s results. At a revenue contribution of $2.166 billion, the iPad represented just under 14% of Apple’s reported revenue, assisting in Apple’s more than 61% growth in revenue year-over-year. Earnings per share for the quarter grew almost 75%.
While these numbers sound impressive, there’s a different and easier way to look at Apple’s results. This weekend on my personal blog, Posts At Eventide, I’ve posted an entry called Understanding Apple’s Success Made Easy.
In seeking to understand Apple’s success only simple math need be applied. In the June quarter Apple retained roughly 40% of each revenue dollar after covering the costs of products and services sold. Of that amount roughly 50% or 20% of each revenue dollar flows to the company’s bottom line. As Apple’s revenue grows due to strong sales of products and services across multiple product lines, earnings will rise at least proportionally with revenue growth.
Looking ahead to the results for the fourth fiscal quarter that ends in September, Apple will mostly likely report revenue at or above $20 billion and earnings per share of at least $4.30. Due to the popularity of the Apple iPad and anticipated strong demand for the iPhone 4, the June quarter results foreshadow another record breaking quarter for revenue and earnings results at a level not seen before.
In the June quarter Apple drew down the global channel inventory of iPhones. In order to meet global demand for the new iPhone and resupply the global channel with product, Apple will sell virtually all iPhones made during the September-ending fiscal period. In other words, revenue growth for the current fiscal quarter may surpass the nearly 75% revenue growth experienced in the three-month period ended in June.
I reiterate my forecast Apple’s share price (Ticker Symbol: AAPL) will move above $400 per share by early May 2011 and should surpass $300 per share within the next several weeks.
Robert Paul Leitao