Analyst: Apple Looking at Earnings Windfall

Evidence of “remarkably strong” demand for the iPhone 5 during the holiday quarter means that Apple (NASDAQ:AAPL) may post a healthy upside to consensus when it reports earnings next week, according to Goldman Sachs.

“Given the healthy supply ramp for the iPhone 5 and what we believe was remarkably strong demand, our [average selling price] and unit assumptions could prove too conservative,” analyst Bill Shope wrote in a note to investors, according to Barron’s. Shope, who reiterated a Buy rating and a $760 price target on the stock, added that he was modeling $53.58 billion in revenue and $12.58 per share in net profit on iPhone unit sales of 48.4 million.

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He acknowledged the importance of the earnings report considering the pressure Apple’s stock has been under lately.

“Given the remarkable compression in investor sentiment over the past several months and the increasingly intense battle between bears and bulls, we believe it is clear that this quarter will be a critical event for the stock,” he wrote, modeling the following three scenarios…

The first is if Apple were to report a healthy December quarter upside, but issue a conservative guidance below March quarter consensus. In that case, the stock will find a healthy bottom and the bull case will gain some steam over the next several weeks, according to Shope. However, the debate about recent concerns over iPhone demand trends will continue.

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The second scenario of Apple reporting a substantial upside (5 percent-plus revenue beat, with earnings per share of $15-plus) and a conservative guidance would substantially damage the bear case and the stock would begin a sharp rebound immediately, he added. And in the third scenario, that of Apple reporting in-line earnings or slightly missing and giving a conservative March-quarter guidance would result in the bear case gaining steam.

Shope is confident, though, that his first scenario was most likely, with Apple beating both consensus iPhone unit and overall gross margin estimates.

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