Analyst: Here’s Why Apple is Looking Up

The iPhone 5 is ready to enter new markets as supply problems abate, and the cheer is spreading for Apple (NASDAQ:AAPL) in the holiday quarter. Sterne Agee analyst Shaw Wu, who has a Buy rating on Apple shares and an $840 price target, has raised his quarterly estimates for iPhone unit sales above Wall Street consensus in a new research note. This week, Apple announced plans to bring the phone to South Korea on December 7 and to China and over 50 countries later this month.

What Makes Wu Optimistic About the iPhone 5?

Wu said his checks with members of Apple’s overseas supply chain had helped him shape his predictions. The analyst raised his iPhone unit sales estimate for the current fiscal first quarter to 47.3 million units from 46.5 million, above the consensus 45 million to 46 million units. The analyst cited the shortening of estimated delivery times for the device and “much better availability in Apple’s retail stores, online store, as well as third-party partners” for his growing optimism.

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“From our understanding, this is despite still robust demand due to improving yields and thus better availability and profitability,” Wu wrote in a note to investors on Tuesday, according to Barron’s.

Are There Still Some Other Issues of Concern for Apple?

Supply problems, though, may be lingering for some of Apple’s other new products this quarter. According to Wu, demand for the iPad mini appears to be overtaking supply at the moment. “iPad mini demand appears stronger than expected and our supplier checks indicate that that is the key reason why lead times remain at 2 weeks,” he wrote.

Low manufacturing yields for Apple’s redesigned iMac lineup and “minor cannibalization” from the iPad and iPad mini will also likely result in slower sales for the computers, according to the analyst. Wu expects Mac sales for the December quarter to come to 5 million, down from a previous prediction of 5.1 million and lower than the consensus of between 5.2 million and 5.3 million.

What Would be the Overall Impact of Wu’s Observations?

Wu raised his quarterly revenue estimate for Apple to $54.6 billion and earnings per share estimate to $13.70 from $53.7 billion and $13.15, respectively. He also increased his gross margin forecast for Apple’s current quarter to 38.5 percent from a previous prediction of 38 percent. For fiscal 2013, the analyst predicts that Apple will earn $193.4 billion in revenue and $49.50 in earnings per share, higher than consensus figures of $193 billion and $49.28, respectively. Apple shareholders were not giving much credence to the positive note on Tuesday morning, with shares down a little less than 2 percent at $574.50 at midday in New York.

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