Apple (AAPL) 2014 Estimates Raised at Needham & Company

October 29, 2013 12:42 PM EDT
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Needham & Company analyst Charlie Wolf reiterated a Buy rating and $595 price target on Apple (NASDAQ: AAPL) following solid Q3 results. The firm also raised FY 2014 estimates.

"Apple reported fourth quarter earnings of $8.26 on revenues of $37.5 billion, nominally higher than the guidance the company provided a month ago," Wolf notes. "On the prospect of stronger than previously anticipated iPhone sales, we’re raising our 2014 earnings estimate from $42.00 to $45.60."

The analyst also highlighted:
  • With the change in its guidance format, Apple’s earnings and revenues are more closely tracking its guidance. Apple’s fourth fiscal quarter results were nominally above recent guidance, but nothing to cause a spike or implosion in the company’s share price.

  • The most positive news coming out of Apple’s conference call was the company’s heightened confidence that it could grow iPhone sales at the three price points currently characterizing the lineup. Contrary to the misplaced hopes of the investment community, Apple has no intention to build market share through downscale pricing. The company believes it can drive the demand curve to the right—a view we share—by solidifying its position as the aspirational brand and ecosystem in the smartphone industry. We do not anticipate a breakout of growth. But it should be steady as more households enter the middle class in emerging markets.

  • Apple was also excited about the prospects of the new iPad Air and retina display iPad mini this Christmas season. The iPad did spectacularly well in the education market in the quarter. And that momentum is beginning to spill over into the business market. Again, the iPad is the aspirational brand in the tablet market as well.

  • It should be noted that Apple’s first fiscal quarter performance would have been materially better were it not for a significant increase in its deferred revenues, which are characterized by much higher margins.

  • The ongoing risk in the Apple story continues to be whether the company can innovate with the same disruption that characterized the Steve Jobs era. However, we are not concerned with the loss of market share to competitors who compete only on price and not on the quality of their offerings.

    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 $529.88 yesterday.

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