Apple (AAPL) Slammed; UBS Gets More Conservative on Growth, Investors on Price
Today, UBS lowered estimates on the out-quarters. Although the firm is not altering Dec quarter numbers materially, they have taken five million iPhones and two million iPads out of the Mar, June, and Sep quarters. EPS estimates go down about 10% and are now roughly 5% below consensus. F2013E is reduced from $51.50 to $47.00 and F2014E from $62.00 to $55.85.
The firm cited four reasons to become more conservative on growth: (1) supply chain checks indicate the iPhone build rate is falling to 25mn units for the Mar quarter (we model 40mn total iPhone shipments); (2) some of our Chinese sources do not expect the iPhone 5 to do as well as the iPhone 4S; (3) the mini may be cannibalizing the larger iPad and sustaining a 20mn iPad run rate isn't easy; and (4) our previous growth estimates seem aggressive given the European economy and tougher handset
competition.
While UBS believes numbers will have to come down, they say the Apple story in not over. "We expect that China Mobile may start to sell iPhones in the Dec quarter, so a summer 5S with TDSCDMA and fingerprint recognition is possible. "Apple is driven to make beautiful products. Whether it is an iTV, wearable computers, or another new product category, we have faith that innovation is not dead."
UBS cut its price target form $700 to $780.
In addition to lower estimates, investors are worried that the iPhone 5 is off to a slow start in China. The WSJ reported that when the iPhone 5 launched at the Apple's flagship Beijing store only two consumers stood inside a cordon set up by Apple. Part of the weak turnout could be related to the weather, which was cold and snowy.
Shares of Apple are down 2.6 percent Friday to $515.93.