RBC Weighs in on Apple (AAPL) Related to Weak Numbers from Dialog

October 26, 2015 12:04 PM EDT
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Apple (NASDAQ: AAPL) is getting slammed today (-3.3%) as investors attempt to read-thru weak results from supplier Dialog ahead of tomorrow's earnings reports from the iPhone giant.

Dialog reported in error and ahead of its 10/28 scheduled date weak September-quarter results and December-quarter guidance below exceptions. Specifically, Dialog reported Sept-qtr revenues/EPS of $330M/$0.68 vs. expectations of $354M/$0.70. For Dec-qtr, DLG guided to $430M-$460M in revenue ($445M at the midpoint), gross margins consistent with the level achieved YTD vs. Street revenue expectations of $475M.

The midpoint of Dialog guidance of $445M for Dec-qtr implies revenues up 2.3% y/y and up 34.8% q/q. RBC Capital analyst Amit Daryanani thinks this has negative implication for AAPL iPhone units "given our discussions with DLG management, which suggest ASPs are up ~4-5% (implying AAPL units being flat to down 2% in Dec-qtr).

The firm notes that the results are not 1-to-1 between DLG and AAPL as there are often inventory build and supply chain dynamics at play that result in a misalignment in revenue reporting between DLG and AAPL.

In addition, the note "AAPL has more 6s/6s+ shipping days in Dec-2015 quarter vs. Dec-2014 quarter that could also be an offset to the headwinds. However, broadly, the implication from DLG's print is directionally negative for AAPL's iPhone units for the Dec-qtr and Mar-qtr."

For Apple, the firm estimates Sept-qtr revenues/EPS of $50.09B/$1.83 vs. Street estimates of $51.00B/$1.88. Their Dec-qtr revenues/EPS stand at $81.51B/$3.47 vs. Street at $76.83B/$3.22. Notably, they estimate iPhone units of 45.16M units for the Sept-qtr and 78.19M units for the Dec-qtr, indicating 73% q/q growth in iPhone units.

RBC maintained an Outperform rating and price target of $150 on AAPL.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $119.08 yesterday.

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