AAPL: Bulls Dismiss iPhone Worries; Pondering Downside to $400

By Tiernan Ray

Shares of Apple (AAPL) are down $14.86, or almost 3%, at $486.89, as the Street responded to yesterday?s concerns about rumored?cuts in iPhone production with a raft of mostly positive endorsements of the stock.

Today?s positive notes follow a rush of such reports defending the stock yesterday morning.

I?d note there is still quite a range of estimates for both last quarter and this quarter in terms of iPhone sales:

William Power, R.W. Baird: Reiterates an Outperform rating and a $750 price target, writing that as regards a projected 20% drop in iPhone sales, quarter to quarter, this quarter, is ?the front-end loaded nature of new market launches is the bigger issue than slowing demand.? What he means is that the iPhone 5 showed up in countries faster this time around than with the 4S: ?We would note that Apple launched the iPhone 5 in close to 100 markets this CQ4, vs. the iPhone 4S in 50+ a year ago. The 5% sequential iPhone shipment decline from CQ4 to CQ1 a year ago might have been closer to 30% if launch timelines were similar to this year. China alone was a significant driver in CQ1 last year, and will benefit CQ4 this year.? He?s modeling 48.5 million units last quarter, up from his prior 46.7 million-unit-estimate, and cut his March-quarter estimate to 39.5 million from 43.5 million.

Shaw Wu, Sterne Agee: Reiterates a Buy rating and an $840 price target. The company?s December-quarter results were likely in line with the Street, he thinks, at $54.4 billion in revenue and $13.70 per share in profit, based on sales of 47.5 million iPhone units. The demand for the iPhone ?remains robust,? he argues, and ?We believe there is great confusion with press reports of order cuts and weak demand.? In fact, writes Wu, the reports merely point to improved manufacturing yields and Apple shifting suppliers. Wu thinks that improved yield could help gross profit surprise to the upside last quarter: ?We are modeling gross margin of 38.7% vs. expectations of 38.3% and guidance of 36%.? Wu sees Apple giving a stock forecast for this quarter, and he?s modeling $44.4 billion in revenue and $10.99 in EPS. ?We have to admit that this upcoming AAPL earnings call has got to be the trickiest as far as we can remember because near-term stock direction will most likely be entirely driven by investor sentiment.?

Hendi Susanto, Gabelli & Co.: Reiterates a Buy rating on the stock and a $950 present value, projecting revenue last quarter of $54.1 billion and EPS of $12.32 per share, on sales of 43.7 million iPhones and 26 million iPads, including 6 million of the iPad mini, while noting that the iPhone count is consistent with ?higher supply chain capacity and wider distribution channels.? Susanto does not provide estimates for the current quarter, however. ?AAPL shares are trading at 5.5x and 11.4x our FY 2013 EBITDA and EPS estimates of $65 billion and $48.00, respectively. We calculate a FY2013 PMV of $950 per share based on our 14x forward P/E plus cash.?

Peter Misek, Jefferies & Co.: Reiterates a Buy rating on the stock and an $800 price target. Misek is modeling 53 million iPhones sold last quarter, and revenue of $59.6 billion and EPS of $15.50. He thinks this quarter?s outlook from the company may end up being ?slightly above consensus? despite Apple?s legendary conservatism in forecasting. That might mean an implicit forecast for 40 million or more iPhones this quarter. Misek actually cut his March-quarter estimate from 48 million units to 44 million units, in part because rumors about another iPhone refresh this year could stall some sales. But he thinks the discussion of production cuts missed the mark: ?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. These fears are based on large CQ1 component order declines, but we believe 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. Our checks indicate that CQ1 iPhone builds are ~50M.?

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