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Apple's mixed Q1 2013 results: What the analysts are saying

January 23, 2013: 9:13 PM ET

The analysts weren't as freaked out as the traders seemed to be

Note after-hours trading.

Note after-hours trading. It was worse a couple hours earlier.

FORTUNE  (Koh Ngai, Thailand) -- There was mild disappointment here and there, but most analysts reacted calmly to a holiday quarter report that carved more than $50 billion off Apple's (AAPL) market cap in after-hours trading.

A sampling of the notes to clients posted Wednesday evening:

Katy Huberty, Morgan Stanley: March Q Another Tough Comp; Catalysts Hit in F2H13. C4Q revenue beat guidance and our forecast but met consensus of $54.5B. The $8B revenue increase Y/Y is impressive, especially with Mac and iPad Mini supply limiting revenues but the stock likely needs to get past the tough gross margin and iPhone channel inventory comps in March to get back on a positive earnings and stock performance trajectory. At 60% of revenue, iPhone and iPad maintain double-digit growth momentum, with units up 35% and 62% respectively after adjusting for the 14th week a year ago and channel inventory changes. iPhone growth will slow some in March given the faster carrier roll-out in December but iPad and Mac growth should accelerate as supply improves. Reiterate $630 price target. 

MORE: 29 stunning Apple surprises nobody saw coming

Amit Daryanani, RBC Capital: Bent Not Broken. AAPL reported modest upside to Dec-qtr expectations and guided March-qtr below street expectations. There was enough in the print for both bulls and bears. As the bulls will point to 1) Strong ramp of iPhones and iPads 2) 260bps upside to gross-margins, 3)Conservative March-qtr guide and 4)Multiple upcoming catalyst(new products, capital allocation, potential china mobile). The bears will focus on 1) cannibalization will hurt revenues and margins, 2) Change in commentary around guide, 3) Lack of new innovative products. We view the results as a sign that AAPL is executing well as they shift to a more normal growth company. We see levers for further gross-margin tailwinds driven by easing transitory costs, supply chain leverage, OPEX controls and new products. Lowers price target to $630 from $725. 

Peter Misek, Jefferies: First thoughts. GM, and EPS exceeded consensus but fell short of our estimates. In particular iPhone shipments of 47.8M (JEF 53M, St 48.3M) were disappointing. Typically conservative revenue and GM guidance was better than many feared for, though implied EPS may be a bit light.

Gene Munster, Piper Jaffray:  Quick Take On Apple's December Quarter Earnings. While iPhone numbers were mildly disappointing, our initial look at Apple's December quarter results does not sway our long term confidence in the iOS ecosystem. The December iPhone number, which we believe is the most important number for the company, came in at 47.8 million compared to the 50 million buy side bogey we talked about in our previous note. For March, the company guided to $41-43 billion in revenue compared to our expectation for a $41 billion guide. Net-net, while we believe the iPhone number may appear disappointing, the slightly better guide implies that investors may not need to continue to worry about noise regarding continued iPhone build decreases for March.  Reiterate $875 price target.

Gokul Hariharan, JP Morgan: Guidance lackluster; prefer iPad over iPhone plays and EMS over high margin components in supply-chain. We believe the iPhone supply chain is likely to remain challenged through 1Q13, given the sharp qoq unit growth for iPhone 5. Strength in iPad mini should mean that the iPad supply chain should fare better in the next two quarters. With clearer indicators of Apple moving towards mainstream products (already in iPads and potentially in iPhones), we believe that it is also consolidating the supply chain towards EMS players, which increases the profit pool that EMS vendors can address, while cutting costs for Apple.

Ben Reitzes, Barclays: Apple Delivers Relatively in line Results, Macs take away the upside – Outlook Mixed. Apple reported fiscal 1Q13 EPS (December quarter) of $13.81, which was above our estimate of $13.38, above consensus of $13.48 and above Apple's original guidance of $11.75. The beat vs. our expectations was largely due to lower-than-expected operating expenses and modestly higher revenue than expected. Revenue of $54.5 billion beat our estimates by about $500 million due to slight upside on iPhones and iPads vs. our expectations. However, many investors likely desired a few more millions of upside in iPhones. It was downside in Macs that was the real surprise – contributing to a $1.3 billion shortfall, likely due in part to iMac shortages. We believe some of this Mac revenue is pushed into the March quarter and would like to see better execution in this segment. Reiterate $740 price target.

Brian White, Topeka:  Apple Delivers its Signature Conservative Outlook. For 2QFY13, Apple expects revenue of $41 billion to $43 billion (Street is at $45.38 billion) and inline with our $41.9 million projection. Our estimates and price target are currently under review. As we indicated in early January, we expect the next iPhone to launch in June (or possibly in May) and we believe an iPad refresh (i.e., iPad 5 and next generation iPad mini) is planned for March. Given this shorter launch cycle for the iPhone and iPad, we recently adjusted the seasonality in our model and particularly for the March quarter, which jibes with the outlook that Apple provided this evening. Reiterate Street-high $1,111 price target. 

ISI's Brian Marshall: Low-Priced iPhone is Paramount to Financial Re-acceleration. Despite the ... penetration statistics for AAPL and the horrific technicals in the stock, we believe the AAPL story isn't over quite yet. In our view, AAPL should bring to market a lower-price iPhone (perhaps wholesale price of ~$300 with GM of ~40% vs. the current iPhone family at ~$600 and ~50% GM) targeted at the international markets in 2H13. If this action were to occur (we think ~70% chance), it would likely drive significant international iPhone adoption (from quarterly penetration rate of ~4% in Dec-12 to more in-line with AAPL's domestic quarterly postpaid penetration rate of ~8% in Dec-12). We believe the end result would be price elasticity kicking-in and driving a new phase of revenue/earnings re-acceleration and AAPL shares would likely get their "mojo" back. Lowers price target to $600 from $710.

Trip Chowdhry, Global Equities Research: Quick Take. 1) Apple beats its guidance. 2) The Apple Stock has been down from its near time high of about $700 to now about $500, and in our view the Apple stock at $500 was reflecting a miss to its guidance, which has not happened. 3) The only explanation of the stock being down in the After hours market is the dividend curse.  Most of the technology stocks that have paid dividends have underperformed the market. Reiterate $650 price target. 

See also: Apple burned by analysts' overheated expectations

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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