Shares of Apple (AAPL) are down $6.30, or 1.5%, at $431.57, after Jefferies & Co.’s Peter Misek reiterated a Hold rating and cut his price target to $420 from $500, writing that there is a 25% chance the company misses this quarter’s estimates, and that shipment of an “iPhone 5S” and a lower-cost device may have slipped from a June time frame to more like July or August.
Misek’s “checks” of Asia-based suppliers lead him to cut this quarter’s iPhone sales estimate, and he expects pressure on the device following Thursday’s expected unveiling by Samsung Electronics (005930KS) of the next “Galaxy” smartphone:
We cut our iPhone estimate from 37.5M to 35M due to builds being only ~25M. We estimate Apple is holding ~2M of excess iPhone inventory on its balance sheet and that Hon Hai also has a few million of WIP inventory.
Misek’s estimate for this fiscal Q2 goes to $41 billion from a prior $42.7 billion, while his EPS estimate goes to $9.52 per share from $10.04 previously. That is below the Street consensus for $42.95 billion and $10.19.
His estimate for the June quarter to $35.5 billion and $7.22 form a prior $40.2 billion and $8.70. Street is at $40.27 billion and $9.56.
Misek thinks that production issues have slowed rollout of an iPhone 5S and a cheaper iPhone, and he thinks Apple will fill the gap with new iPad releases in June:
iPhone 5S/low-cost iPhone launch delayed. Our checks indicate Apple’s suppliers are having problems with the new casing colors leading to a push out from Jun to Jul-Sep after Apple hoped to pull forward the update. Our checks also indicate pricing of the low-cost iPhone will be $350-$450 as some of the specs are higher-end than we expected (e.g., 4″ in- cell retina display, same app processor as the 5S). The main difference is the housing (plastic vs. aluminum). We estimate mid-40%s GM for the 5S and low 30%s for the low-cost. iPad refresh possibly pulled forward to Jun. We believe Apple is switching to an IGZO display for the 9.7″ to cut the weight in half and attempt to reboot sales; however, yield issues could still make this a CQ3 event. We also expect a retina mini. Due to the iPhone delay and negative GM mix shift, our CQ2 EPS estimate goes to $7.22 (St $9.58).
Misek thinks chances are greater than 50% Apple will offer a smart watch of some kind this year, perhaps around $200, though he views it as a “niche” display.
An Apple television set appears also to be still in the pipeline, though getting hardware right is holding things up:
We had expected an iTV-related event in March followed by a launch Sep/Oct; however, we believe the launch has been pushed to some time in CY14 as neither LG or Sharp have been achieving yield on the displays. We had thought that Apple�s software and ecosystem would be enough to drive demand but our checks indicate that Apple wants the hardware to also stand out.
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