By Dan Gallagher, MarketWatch SAN FRANCISCO (MarketWatch) — Booming sales for the iPhone and iPad over the holiday period are expected to help Apple Inc. report strong double-digit earnings growth for the December quarter next week.
In addition, some data indicate that the company’s line of Mac computers has gotten a boost — despite the fact that the iPad has begun to cannibalize sales of laptop computers from other manufacturers. The redesign of the ultra-thin Macbook Air is expected to have helped the category. Apple /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL 347.76, +2.08, +0.60%) will report results for its first fiscal quarter on Tuesday after the closing bell.
Wall Street, on average, expects the company to report earnings of $5.38 per share, up from $3.67 per share in the same period the previous year. Revenue is expected to soar 55% to $24.3 billion, according to consensus estimates from FactSet Research.
Growth is expected across nearly all of Apple’s product categories, with the exception of the iPod, which is forecast to see a decline in unit sales compared with last year.
“We believe Apple’s [first quarter] was supported by a strong product line-up that included some of the most heavily gifted items during the holiday season (iPad, iPhone, iPod), as well as strong buzz and demand for MacBook Air,” Maynard Um of UBS wrote in a report Thursday.
Could Apple stock hit $1,000?
If Apple stock were somehow able to continue booming at the same rate of the past 18 months, could it hit $1,000 by February 2013.The iPhone is expected to be the main diver. Analysts on average expect Apple to report shipments of about 15.8 million iPhone units — representing a whopping gain of 82% compared with the same quarter last year.
The gain is notable, given that Apple was widely expected to expand the carrier base for the device this year, in particular at Verizon Wireless.
Such a deal was announced earlier this week, with the iPhone 4 expected to go on sale at Verizon on Feb.
10. Read full story about Verizon iPhone.
“We believe iPhone demand remains robust and that demand in the December quarter was helped by holiday sales momentum and various promotions run by partners reducing the price of the iPhone for a limited time,” Ben Reitzes of Barclays Capital wrote in a note to clients on Wednesday.
IPad not hurting Mac sales
Another big seller is the iPad, which analysts believe moved about 6.2 million units during the quarter.
The iPad — which was not on the market at this time last year — was expected to have somewhat of a cannibalizing effect on sales of some of the company’s laptop computers. But that doesn’t seem to be the case. Both Gartner Inc. and IDC reported Wednesday that Apple was one of the few PC makers to see strong sales gains in the fourth quarter in the U.S. market. Read full story on PC sales in fourth quarter.
Tablets take a bite out of PCs
Personal-computer sales grew at lower-than-expected levels for the fourth quarter as increased competition from other devices - particularly the iPad - began to erode market share for traditional PC products.Analysts project, on average, that Apple shipped about 4.1 million Macs during the December quarter, which include both laptops and desktop models.
“A dramatic pick-up in MacBook Air sales following October’s product refresh drove better-than-normal Mac seasonality in [the first quarter],” wrote Richard Gardner of Citigroup in a report Thursday. He added that better component prices and more laptop sales may also improve the company’s gross margins.
Margins are the one area of concern among some Apple investors. At this time a year ago, Apple was comfortably reporting gross margins of 40% and above. This number began to slip in late 2010, as the company said it was pricing its newest iPhones and iPads “aggressively.”
More competitors have entered the smartphone category against the iPhone, and more are expected this year for the tablet space. The company reported a gross margin of 36.9% for the September quarter and told investors to expect around 36% for the December period.
Still, the company is considered the leader in most of its market segments. Its devices — along with its vast ecosystem of entertainment content from iTunes and apps from the App Store help make its devices popular with consumers.
“Apple’s hardware and software innovation, the richness of its app and content ecosystem, and its time-to-market advantage give it a strong leadership position in mobile computing,” wrote Andy Hargreaves of Pacific Crest in a report Wednesday. “We believe this position can continue to contribute to outsized revenue and profit growth for the foreseeable future.”
Dan Gallagher is MarketWatch's technology editor, based in San Francisco.
