December 21, 2012 at 11:57 AM EST
AAPL: RBC Cuts Target to $725, Wells Sees Services Advantage; Safest Stock?
Another day, another set of mixed views on Apple ( AAPL ). RBC Capital's Amit Daryanani , while reiterating an Outperform rating on the shares, lowers his price target from $750 to $725, after cutting his revenue and EPS estimates for this fiscal year ending in September to reflect lower sales of the iPhone and also cannibalization of the regular iPad by the new mini , "given recent data points from the supply-chain." Daryanani cut his March -quarter iPhone estimate to 42.1 million from 50 million , with his full-year estimate going to 161.5 million units from a prior 170.26 million units. Daryanani keeps his gross margin estimate for Apple this year about intact, going from 40.4% to 40.3%, arguing that the company is getting better yields on production of the device, which may help profitability "down the road": Our checks suggest AAPL is guiding the supply-chain towards seasonal patterns for iPhone’s implying units may decline ~10% q/q. Positively, yield inefficiencies have subsided through the supply-chain which should provide margin tailwind in Dec-qtr and beyond. Long-term we believe Apple can sustain double digit revenue and EPS growth on the back of iPhone, iPad and possible launch of an iTV. On the iPad, Daryanani, his iPad estimate actually rises to 20.6 million units from 19.6 million for the March quarter, and he thinks profit will be better on the mini than the iPad regular, though it does reduce revenue from iPad for the year thanks to lower prices: We believe the iPad Mini is continuing to seeing rapid adoption and yields have consistently improved. While the Mini may cannibalize iPad 10" sales, we estimate the gross margin profile for the product is higher than the larger iPad due to cheaper components within the product. While ASPs should decline in the iPad line-up, the margin profile should improve allowing corporate margins to stay at or above the 40% mark in the long-run. Daryanani's full-year estimates go to $187.85 billion and $48.64 per share in profit from a prior $192.99 billion and $50 per share. On the other hand, Wells Fargo's Marynard Um , reiterating an Outperform rating as well, and a $710 to $730 "valuation range," writes this morning that investors fail to grasp the importance of Apple's customer service .
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