Earnings preview: Pent-up demand

Wall Street’s eyes are on Apple, which announces its latest quarterly earnings this Tuesday, April 23, at 2 p.m. Pacific, 5 p.m. Eastern. As always, Macworld will be on hand with live coverage of the announcement, along with the subsequent question-and-answer session with financial analysts.

While Apple’s status as one of the most valuable companies in the world means that its financial information is always scrutinized, this quarter may see even more attention than usual. The company’s stock price has declined precipitously over the last six months, from a high of over $700 to well under $400. The financial community will be waiting, breath held, to see if Apple will continue to buck their expectations.

Great and not-so-great expectations

Make no mistake, though: This is about the expectations game. The cause of the stock price drop can be laid squarely at the feet of rumors aplenty; there are whispers of everything from low demand for iPhones to cut component orders. And, of course, there’s the general lingering feeling in the minds of many analysts—rational or not—that Apple needs to deliver some new revolution in order to ensure continued success.

But is such a pessimistic outlook really warranted? During last quarter’s financials, CEO Tim Cook cautioned against reading too much into the company’s supply chain, describing it as “very complex” and saying that “it’s good to question the accuracy of any kind of rumor about build plans.”

That doesn’t mean, however, that the stock price drop is being ignored; during the company’s shareholder meeting in February, Cook said he wasn’t happy about the stock price, but that the company was focused on the long term.

That brings us to Tuesday’s financial results. Apple, which adopted a new forecast methodology last quarter, is predicting revenue between $41 and $43 billion and a gross margin of between 37.5 percent and 38.5 percent; notably, the company is not providing guidance on its earnings per share, as it has in the past. Analysts, of course, are only too happy to fill that void: As of this writing, the consensus estimate of earnings per share is just a shade over $10—that’d be significantly down from Apple’s earnings in the same quarter last year, which hit $12.30.

Set your watch

So, if you’ll be tuning in to the financial results—or even just casting an eye at them after the fact—there are a few things to keep an eye out for. First is iPhone sales: For better or worse, these have become the barometers of Apple’s success. The iPhone remains the backbone of Apple’s revenue, and though the company will undoubtedly report scads of handset sales, analysts will be watching closely to see how those sales compare to last year’s second quarter—and how they match up to increasing incursions from Apple’s competitors, especially Samsung.

Another area to watch, surprisingly enough, is Mac sales: While the professional Mac promised by Tim Cook has yet to make an appearance, the most recent revision of the iMac—which was largely constrained in supply last quarter—should have begun shipping in volume in the past three months. That could provide a bright spot in Apple’s line-up.

If Apple does still manage to top analysts’ expectations, as it’s done so many times in the past, it’s also important to keep in mind that it will have done so in a quarter that saw the release of no new Apple products—in fact, about the only thing Apple did release was the 128GB version of the fourth-generation iPad.

To assuage those concerns that innovation has stalled, expect Tim Cook and CFO Peter Oppenheimer to expound on their faith in the company’s forthcoming product pipeline. Nobody can resist talk of future products, even if Apple executives remain as tight-lipped as usual. Because no matter which way Apple’s results go, it seems clear that all of us—analysts, pundits, and consumers alike—are suffering from our own pent-up demand: We’re all waiting to see what Apple has up its sleeve next.