UBS Reiterates Buy Rating, $700 PT on Apple
10:02a ET January 14, 2013 (Benzinga) In a report published Monday, UBS Securities reiterated its Buy rating and $700.00 price target on Apple (NASDAQ: AAPL).
UBS Securities noted, “The Wall Street Journal led with the story that Apple cut its iPhone 5 component orders due to weaker demand. The article says Apple notified suppliers of the cut last month, which is when we and most of the Street reported it. Consequently, it appears this is old news—our analysts indicate no changes since. In December, we reduced our iPhone 5 estimates by 5mn a quarter due to the 30% production cut being reported out of Asia. At that time, our analysts estimated that Mar quarter iPhone 5 production would be 25-30mn and 4/4S 3-5mn. How much of the reduction was a result of inventory rebalancing vs lower demand was unclear, but the cut was greater than seasonal so we took the conservative route.”
UBS way underestimating 4 and 4S demand. Study showed 32% of October iPhone sales were 4 and 4S. OUS likely higher. This is where Apple will surprise on volume and margin (as 4 and 4S probably higher margin than 5 even with discounts). I think they are also underestimating the impact of higher early yields than expected on order reductions.