After supplier and channel checks, Wu anticipates a modest revenue and earnings beat, but he believes that Apple’s guidance likely will be what he called “vintage conservative.” He said:
The key reason being higher iPhone 5 quality control costs that AAPL will likely partially absorb. Despite near-term gross margin concerns, our fundamental view remains upbeat as we believe iPhone 5 and iPad mini will drive the industry’s most powerful product cycle.
Wu sees the iPhone as coming in better than consensus estimates of 25 million to 26 million units as he sees 27 million shipped out. Supply chain checks have indicated that Apple still has robust demand trends despite the maps issue and production capacity actually has improved due to better yields on in-cell touchscreens.
Wu did note that iPad likely will come in a tad light ahead of the refresh cycle and Mac sales would be in-line with expectations. Consensus iPad estimates are 17 million to 18 million units, but Wu sees 16.5 million coming in. The difference here is that Wu sees the December quarter looking better and he is raising his iPad unit projection to 25.5 million units from 22.3 million as his prior estimate. Consensus is 24 million to 26 million. We sees 4.8 million Mac units, which is at the upper end of the 4.7 million to 4.8 million expected.
Apple shares are trying to come back after a serious sell-off of late. The stock is currently up 1.4% at $618.50, and the 52-week trading range is $363.32 to $705.00. The consensus price target is currently around $778 on the stock.
JON C. OGG
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