Apple (AAPL) Estimates Raised at Bernstein on Higher ASPs

Apple (NASDAQ: AAPL) is modestly higher in early trade following positive comments from Bernstein analyst Toni Sacconaghi as he previewed results. The analyst expects upside to ASPs, but said iPhone unit growth in FY 19 is most likely to shape investor sentiment.

The firm is raising Q4 and FY 19 revenue and EPS estimates, largely due to richer ASP assumptions for iPhone and Watch.

"While Q4 18 results are not important on a standalone perspective, we are ahead of both consensus and guidance largely due to iPhone ASPs. Overall, we forecast Q4 18 iPhone ASPs of $800, vs consensus at $741, resulting in revenues of $63.3B vs consensus at $61.3B and EPS of $2.90 vs consensus at $2.77."

For FY 19, they expect flattish iPhone unit growth and gross margins YoY, but expect notably higher iPhone ASPs ($813 vs. $775), which leads our revenue and EPS estimates to be above consensus forecasts ($291.3B, $14.15 vs. $280.6B, $13.64).

Despite the higher ASPs, the analyst said they believe that iPhone unit growth is likely to be the critical metric for investors going forward.

"We see the stock likely continuing to outperform if iPhone units can grow in FY 19, and the stock underperforming if units are down 3% or more," he commented. "Given that we believe consensus iPhone ASPs are too low for Q4 and Q1, we believe that Apple could potentially guide Q1 in line or above consensus revenues of $92.7B (we are at $95.9B). We would view guidance for sequential revenue growth of >50% as pointing to flattish iPhone unit growth or better."

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