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  • danashenfelter danashenfelter Jan 17, 2013 3:43 PM Flag

    does anyone have a MS account?...

    January 16, 2013
    Apple, Inc.
    Attractive Risk:Reward into
    Strong US demand should translate to iPhone/iPad
    upside and higher than expected gross margin.
    C1Q13 seasonality concerns are overblown and
    several catalysts exist through the remainder of
    2013, in our view. We see 6:1 upside to our base
    case of $714 vs. downside to our bear case of $450.
    We expect Apple to beat C4Q12 consensus revenue
    and earnings estimate of $54.6B and $13.35. We
    believe iPhone shipments drove the upside, as in-cell
    display and labor constraints eased and iPhone 5 supply
    improved through the quarter. Recent data from US
    carriers and our holiday survey suggest demand was
    stronger than expected. We also see modest upside to
    our 20M iPad unit forecast (cons. 22M) on the back of
    iPad mini strength.
    Strong iPhone sales could drive gross margin
    upside. We model like-for-like gross margin declines
    across Apple’s product lines due to higher costs early in
    product cycles. That said, mix could provide an
    offsetting tailwind, with every 1M iPhone unit upside
    adding 10-15 bps to gross margin, all else equal.
    C1Q13 iPhone shipment concerns are overblown, in
    our view. As constraints eased, iPhone suppliers built
    about 13M more units than we model in 2H12. If we add
    this inventory to the March build plans, we believe Apple
    can ship 40-45M iPhones in C1Q vs. current market
    expectations of 35M-40M. So, while it’s reasonable to
    expect conservative guidance given recent behavior, we
    believe our current estimates are ultimately achievable.
    List of potential catalysts growing: 1) iPhone launch
    in summer 2013 which could include a lower priced
    version, similar to iPad Mini, 2) new iPads, including
    iPad Mini with Retina Display around mid-year, 3)
    expanded carrier partnerships with T-Mobile in the US,
    NTT Docomo in Japan, and/or China Mobile in 2H13, 4)
    increased share repurchase (at current levels, every
    $5B buyback lowers share count by 1%).

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