tag:blogger.com,1999:blog-4057266811973629846.post2915862447451594570..comments2024-03-13T11:12:39.070-04:00Comments on deagol's AAPL model: Gross margin key for EPS estimateDaniel Tellohttp://www.blogger.com/profile/18356162909901960817noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-4057266811973629846.post-20905086658826536732010-10-19T23:12:13.492-04:302010-10-19T23:12:13.492-04:30Hey, where's the post-earnings article? Chirp ...Hey, where's the post-earnings article? Chirp chirp, we baby chicks (i.e., AAPL longs) need to be fed!JDSoCalnoreply@blogger.comtag:blogger.com,1999:blog-4057266811973629846.post-55192904597201374582010-08-30T23:27:02.285-04:302010-08-30T23:27:02.285-04:30Interesting analysis. Yes GM is significant, and a...Interesting analysis. Yes GM is significant, and a significant component of GM is material cost. Buying power gets your material cost down - and with $45B+ in the bank, AAPL has buying power. You get a great price when you call up Toshiba looking for a billion dollars worth of Flash. That's why I don't want a share buyback - it's a better investment to leave the cash with Jobs.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4057266811973629846.post-39204204252260961152010-08-26T21:05:48.733-04:302010-08-26T21:05:48.733-04:30"I remember that OI&E used to play a majo..."I remember that OI&E used to play a major role in overall earnings. Not so much these days."<br /><br />Exactly, we can practically ignore OI&E, missing it by 50% and it would only move EPS 3.5 cents. But you can see there how I expect interest rates to climb, shown as an increasing effect OI&E would have over the next couple of years (climbing red line on the second chart).Daniel Tellohttps://www.blogger.com/profile/18356162909901960817noreply@blogger.comtag:blogger.com,1999:blog-4057266811973629846.post-29421401272428846952010-08-26T20:52:21.856-04:302010-08-26T20:52:21.856-04:30Yes, the relationships between the effects on EPS ...Yes, the relationships between the effects on EPS from the same relative variation on all those variables are conserved, for a 1% or 5% or 15% or any other relative variation on the variables. This applies to the top 2 charts where there are no halo effects (not sure what happens on the others).<br /><br />So, a 1% change in GM would affect EPS by almost 1.4% (1/10th of the near 14% shown in the 10% graph for GM) and a 1% change in opex would affect EPS by nearly 0.4% (1/10th of the near 4% graphed for opex)Daniel Tellohttps://www.blogger.com/profile/18356162909901960817noreply@blogger.comtag:blogger.com,1999:blog-4057266811973629846.post-5197219700155199932010-08-25T01:35:53.345-04:302010-08-25T01:35:53.345-04:30Oh. My bad - I guess you can't weigh it the w...Oh. My bad - I guess you can't weigh it the way I just did. I just tried to apply it directly to the percentage without taking into account how a tenth of a percent in absolute terms compares on a relative basis to other measures. I think I was confused by the general thrust of thesis. But reducing a gross margin estimate by 1% in relative terms would have a bigger impact than reducing say operating expenses by 1% right? According to your first chart that is. I remember that OI&E used to play a major role in overall earnings. Not so much these days.Andy M. Zakyhttps://www.blogger.com/profile/15822925585309954360noreply@blogger.comtag:blogger.com,1999:blog-4057266811973629846.post-91753993692960629962010-08-24T19:06:39.028-04:302010-08-24T19:06:39.028-04:30Ok, a tenth of a point (±0.1% if I understood righ...Ok, a tenth of a point (±0.1% if I understood right) might be stretching it. Such a difference in GM% would translate to less than two cents for the current quarter in my model.<br /><br />To clarify, when I plugged in a 10% difference in GM% and tax%, it's a relative or ratio difference. For example, GM% coming at 38.5% instead of the 35% Apple guided at would be a 10% relative difference (and a 3.5% absolute difference). Tax rate coming at 24.3% instead of a hypothetical 27% estimate would be 10% relative (and 2.7% absolute).Daniel Tellohttps://www.blogger.com/profile/18356162909901960817noreply@blogger.comtag:blogger.com,1999:blog-4057266811973629846.post-29516006250752740232010-08-24T17:14:51.517-04:302010-08-24T17:14:51.517-04:30Very nice. It demonstrates the significant import...Very nice. It demonstrates the significant importance that a tenth of a point on gross margin plays in arrive at estimates. Very key.Andy M. Zakyhttps://www.blogger.com/profile/06836231328760255286noreply@blogger.com