Jefferies' Sees Two Very Lean Quarters for Apple (AAPL), Says Low Cost iPhone Pushed Back

April 16, 2013 8:44 AM EDT
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Jefferies analyst Peter Misek commented on Apple (NASDAQ: AAPL) ahead of Q2 results due April 23rd and following an Asia trip. He sees weak Q2 results, and Q3 guidance well below the Street.

"For CQ1 we think Apple likely achieved the low end of guidance but that results will be below consensus and see substantial downside to CQ2 consensus," Misek said. "After our Asia trip we now think the low-cost iPhone launch could be pushed to CQ4 and have increased confidence that the iPhone 6 will not launch until CY14."

Misek has two key takeaways form his Asia trip:
Asia trip takeaway #1: slight push-outs in product launches. iPhone 5S is having pre-production issues with mass production at least a month or more away. This combined with the publicly discussed delay of iOS7 puts a July availability at risk (we had estimated July to early Sep). Low-cost iPhone launch may be pushed to CQ4, causing material risk to CQ3's current 50M total iPhone build plan. iPad mini refresh unlikely in CQ2 and if it does occur it would involve very low volumes due to yield issues of the new on-cell retina screen technology.iPad 5 refresh may occur in CQ2 but volumes also look very low. We have not yet seen any evidence of iWatch production. We continue to believe there is almost no chance the iPhone 6 launches in CY13 due to supply chain issues; June 2014 is more likely. iTV is unlikely this year as our checks indicate Apple wants a 4K screen at a $2,500 ASP. We think Apple's high and low-end product holes will continue.

Asia trip takeaway #2: changing relationship with suppliers. Apple has taken a more conciliatory tone. Suppliers are worryingly beginning to discount Apple's build plans following ~6 months of revisions. Apple seems to be facing material technology risk with its screen transitions causing yield issues and its app processor transition facing possible ramp issues at TSMC.

For Q2, Misek sees revenues of $41 billion and EPS of $9.52, which is below the consensus of $43 billion and $10.11, respectively, and at the low end of the $41-$43 billion guidance. He sees iPhone shipments of 35 million, versus the consensus of 37 million, and iPad shipments of 18 million.

For Q3, Misek sees revenues of $35.5 billion and EPS of $7.22, which is sharply below the consensus of $39.3 billion and $9.23, respectively. He sees iPhone shipments of 26 million, versus the consensus of 31 million, and iPad shipments of 20 million.

Misek maintained a Hold rating and price target of $420 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 $419.85 yesterday.

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