) continues under heavy pressure Tuesday as weak iPhone demand and
margin fears continue to dominate trade. However in just 8 days the
world will get a quarterly report card from the iPhone giant and
will be able to see for themselves just how bad, or good, the
company is doing.
Jefferies' Peter Misek, who was ahead of the Street on the Apple
iPhone 5 component cuts (which dominated trade Monday), offered a
preview of Apple's upcoming December quarterly report (FQ1) today.
His view is that everything is okay and he expects a beat and solid
Misek remains comfortable with his estimate of 53 million iPhone
estimate and revenue/EPS of $59.6B/$15.50, which is sharply above
the Street at $54.58 billion and $13.34, respectively. He sees
gross margin of 39%, which compares to the Street at 38.4%.
The analyst believes guidance when adjusted for Apple's typically
conservatism will be slightly above consensus and imply 40M+
iPhones versus the fears of mid-30s. Misek sees 44 million iPhones
in the March quarter (FQ2).
Misek also said checks indicate that preliminary builds for the
iPhone 5S will start in March for a launch in June/July. "As word
of the earlier production schedule starts to spread, we believe we
could see a slight slowing of demand CQ1 in anticipation of the new
product launch and Apple will likely start curtailing channel
inventory. Therefore we tweak down our CQ1 iPhone shipment estimate
from 48M to 44M, which is still well above widespread fears of
shipments in the mid-30Ms."
Commenting on fears of of large CQ1 component order declines, Misek
the primary drivers are: 1) an assembly bottleneck caused component
inventories to rise in CQ4; 2) new iPhone builds starting in March;
3) demand being in line to slightly below optimistic expectations.
On rumors of an entry level iPhone, Misek said he expects a
concentrated low-cost iPhone rather than a "cheap" one. Likely
specs, according to Misek: polycarbonite case with 4" non-Retina
display and no LTE. We believe a new low-cost iPhone would increase
Apple's share, decrease GM, but have little impact on EPS.
China Mobile will possibly introduce and subsidize a 3G TD-SCMDA
version of the iPhone by mid-2013, according to Jefferies China TMT
analyst Cynthia Meng. Also, two iPhone 5S prototypes are in serious
testing, according to developer logs and code analysis (but one
could be the low-cost solution and the other the 5S). Misek said he
seen no further evidence of the 4.8" prototype; this is likely the
Misek maintained a Buy price target of $800.
For an analyst ratings summary and ratings history on Apple
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Shares of Apple are down 2.8 percent to $487.69 in mid-day