Apple 2.0

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Apple analysts rush to make last-minute revisions - updated

April 22, 2013: 10:56 AM ET

Monday morning quarterbacking before Apple's Tuesday afternoon earnings call.

FORTUNE --There are always a few stragglers who wait until the last minute to take a fresh look at their Apple (AAPL) spreadsheets -- some of which haven't been updated since January.

Below: Excerpts from the analysts' notes we've seen today. More as they come in, newest on top.

BGC's Colin Gillis: Jump in the fire, as any Apple good news could boost up the stock. "We are taking advantage of the weakness in AAPL shares to upgrade our rating to BUY from HOLD... We do not expect that shares of Apple return to its lifetime high of $705.07 this year, and it is possible that Apple may never again revisit those levels. Our upgrade is based on the following: 1)   The company has not negatively preannounced March quarter results so we expect revenue and earnings in the guidance range provided on January 23. 2)   June quarter guidance is likely to be tepid, but we believe this is already widely expected. We model 3% YoY revenue growth for the June quarter. 3)   There could be upside to earnings if the company is able to produce leverage on its gross margin. Our March quarter EPS is above consensus. 4)   A revamp of the iOS operating system by designer Jony Ive may drive interest in an iPhone 5S by providing a fresh look to the software even though the hardware may retain the same form factor. 5)   A dividend increase may serve to draw in new investors seeking yield. 6)   The smart phone market, while showing signs of slowing growth, remains one of the most lucrative markets with close to 1 billion units expected to ship in 2013. Raises price target to $550 from $500 and rating to Buy from Hold. 

UBS' Steven Milunovich: Looking past the earnings call. "Survey work by Consumer Intelligence Research Partners of 500 US-based consumers suggests some improvement in iPhone storage capacity demand, which could help ASPs in the March quarter. In addition, more respondents are replacing Android phones and the proportion of first-time smartphone buyers is healthy at about one-third. Still, the mix of iPhone 5 vs. iPhone 4/4S remains near 50/50 as confirmed by Verizon's recent iPhone activation numbers... Although near-term fundamentals are weak, the stock is close to capitulation, in our view. Maintains $560 price target and Buy rating.  

Sterne Agee's Shaw Wu: Anticipate Slight March Quarter Miss But Guidance May Not Be As Conservative as Expected. "We continue to believe AAPL will likely hit the lower-end of its guidance meaning consensus estimates may still be a little high. However, we believe expectations for the June quarter have come down adequately to reflect an inventory drawdown and pause ahead of 2H refreshes. The good news is that data points appear to be hitting a bottom... A key question many investors are asking is whether AAPL's comment that its new guidance is more realistic than it has historically been will ring true... For the June quarter, we continue to pick up build plan cuts in our supplier checks but believe expectations have come down adequately enough. Lowers price target to $610 from $630. Maintains Buy rating. 

Citi's Glen Yeung: Miss & Lower Well Contemplated, but Delayed 5S Could Extend Weakness. "We expect Apple to report at the low-end of their range of guidance (revenue range $41B-$43B, Citi $40.5B, consensus $42.6B), reflecting softer-than-expected demand for both iPhone5 and 10" iPad. Recall on 3/6/13, we lowered our already below consensus estimates for Apple, based on indications of continuing cuts to Apple's supply chain. And while we have seen steady EPS reductions from our peers since that time, we nonetheless expect Apple to guide 3Q13(Jun) well below current consensus. Although it is fair to say much has been built into the shares, in our view, we see little from upcoming results to warrant buying the shares: We remain in the minority by NOT recommending Apple shares." Maintains $480 price target and Neutral rating.

BMO Capital's Keith Bachman: Another bite out of Apple. "Based primarily on Verizon's earnings report, we are once again lowering our estimates for Apple. We had previously assumed 70% high-end iPhone 5s and 30% lower-end iPhone 4S/4 units in the remaining three months of FY2013 and 50% high-end iPhone 5/5S and 50% lower-end iPhones in FY2014. However, we are changing our mix assumptions to 55% high-end iPhones in the remaining three months of FY2013 and 45% in FY2014... Given the changes mentioned, we are lowering our FY2013 EPS estimate to $39.26 from $41.24 and our FY2014 estimate to $42.00 from $45.00. We are materially below consensus estimates, but we believe that most investors place little weight on current sell-side estimates. Lowers price target to $440 from $460. Maintains Outperform. 

CLSA's Avi Silver: Moment of Truth. "Apple's brand remains intact, but it has not reacted to important trends quickly enough; including a larger screen (not expected in 2013) and lower-end iPhone (expected in C4Q13), updating its iOS user interface (expected mid-year), and improving its services capabilities. While Apple is facing weak fundamental trends heading into the Jun-Q lull (we lowered our estimates and rating on Mar-11th based on a weaker Jun-Q outlook and no larger screen iPhone in 2013), its share price seems to be discounting far worse. In addition to addressing the aforementioned issues, Apple also needs to demonstrate crisper execution with its new products for C2H13." Maintains $505 price target and Outperform.   

Crowell, Weedon's James Ragan: Low Expectations Prevalent. "We have lowered our fiscal Q2 and Q3 revenue and EPS estimate to reflect 1) recent comments from AAPL component suppliers suggesting slowing orders in advance of a potential product transition and, 2) the lack of a formal iPhone agreement in China with China Mobile... However, we continue to believe multiple catalysts exist after the Q2 report. Potential catalysts include 1) a substantial dividend increase and share repurchase program, 2) new products for the iPhone, iPad, and others, 3) a formal agreement to sell iPhones to China Mobile subscribers. While AAPL fear and uncertainty remains at high levels, we believe owners of the shares will be rewarded from current levels. Lowers price target to $625 from $725. Maintains Buy. 

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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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