Apple's (AAPL) iPhone Refresh Looks 'More Stable Than Feared' - Pacific Crest

Apple's (NASDAQ: AAPL) iPhone refresh appears better than feared, said Pacific Crest analyst Andy Hargreaves noting September iPhone component orders look "stable." In his view, near-term downside in the stock is limited despite growing risk around Apple Watch.

"Although it is early and we lack visibility into the critical December quarter, our initial estimates of iPhone component orders in FQ4 suggest Apple is anticipating demand in the next iPhone cycle that is ahead of our current expectations. A meaningful decline in F2016 iPhone unit sales has been our largest concern, so the slightly higher-than-expected initial order volume reduces risk to the shares, in our view," said Hargreaves.

The analyst continued, "iPhone demand appears to have remained solid in recent months, which, along with checks at suppliers, suggests the potential for Apple to sell 50 million to 52 million iPhones in FQ3 versus our estimate of 46.8 million. This could add as much as $0.20 to our FQ3 EPS estimate of $1.86, which is already $0.10 ahead of the Street estimate of $1.76."

Commenting on the Apple Watch, Hargreaves said, "Our F2016 estimate could be at risk unless new compelling functionality is created. After strong initial demand, follow-on interest in Apple Watch appears mediocre. Our checks at suppliers suggest this may have driven a modest reduction in component order volume through September. While we expect Apple to meet our F2015 estimate of 11 million, we see growing risk to our F2016 estimate of 24 million."

Pacific Crest has a Sector Weight rating on Apple.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $126.92 yesterday.

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