Analyst: Apple Will Shine Again

Apple’s (NASDAQ:AAPL) may have gone unexpectedly cold over the past few months, but according to Wells Fargo’s Maynard Um, the stock will thaw this summer once the company launches a new iPhone. According to Um, Apple will continue the trend of having a very similar next model — like the iPhone 4 and iPhone 4S — with the use of shared components in the two versions boosting gross margins. With the launch of the “iPhone 5S,” Apple’s current “black ice” will “thaw through summer,” Um wrote in a research note, according to AppleInsider.

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Improving gross margins will in turn pave the way for investor sentiment to turn positive. “While this requires some patience as the cycle transitions and then matures to drive gross margin, we believe valuation will rise with sentiment,” the analyst wrote.

Um did lower the bottom of his “valuation range” on Apple’s stock to $680 to $730 from a prior $710 to $730 to account for delays in Mac shipments.

Wells Fargo AAPL Valuation

For the December-ending quarter, he expected Apple to have sold 48 million iPhone units, of which three quarters were the iPhone 5. Of the estimated 20.2-million iPad sales, Um allotted half to the iPad mini. If that were true, the average selling price of the Apple tablet would have dropped to $450. Um’s revenue estimate of $53 billion is below Wall Street consensus of $54.7 billion, while his earnings per share forecast of $13.67 is above the average of $13.41.

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While the December quarter was record-breaking, it would have been a lot more impressive if not for concerns around growing competition and diminishing demand, the analyst wrote. In addition, some operators had been restrictive on upgrades relative to past new product launches, making Apple’s iPhone launch weaker than it could have been, he added.

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