iphone 5 sales

Apple Inc. (NASDAQ:AAPL)’s new iPhone 5, loved one day, and hated the next. iPhone 5 fevers invades the tech and financial world, and then riots break out at Foxconn. However, while this cycle plays, Apple Inc. (NASDAQ:AAPL) continues bringing in more and more cash each day. Additionally, Apple is getting some upgrades, which is helping to boost the stock price higher. The company’s stock price is hitting record highs on an almost daily basis. Pacific Crest Securities is the latest to join the upgrade bandwagon.

analysts upgrade apple based on iphone 5 sales estimates being boosted

The sell-side firm has increased its price target for Apple Inc. (NASDAQ:AAPL) from $690 to $760. The reason for the upgrade? Improved supply, very strong demand prompt higher iPhone estimates. Evidence of solid iPhone 5 supply and incredibly strong demand drive their FQ4 iPhone unit estimate to 28 million from 24 million and their F2013 iPhone unit estimate to 176 million from 163 million.  An increase to  iPhone unit and gross margin estimates offsets a decrease to their Mac unit and iPad gross margin estimates and drives their F2013 EPS estimate to $60.79 from $55.09.

The anticipation of a larger iPhone user base in F2014 and, therefore, higher replacement sales, drives their F2014 iPhone unit estimate to 183 million from 169 million and their F2014 EPS estimate to $63.29 from $57.47.

Some further notes from Pacific Crest summarized below:

Increased iPhone estimates drive F2013 EPS to $60.79 from $55.09; F2014 to $63.29 from $57.47. They are raising  their iPhone unit and gross margin estimates, which offset reduced Mac and iPad gross margin estimates.

Their channel checks suggest that Apple Inc. (NASDAQ:AAPL)’s iPhone 5 component supply has been improving over the last couple of months, and they now believe that supply will support Apple Inc. (NASDAQ:AAPL) unit sales that are well ahead of their previous estimates. Additionally, early demand has lived up to their high expectations and appears sustainable through at least the March quarter.

Apple Inc. (NASDAQ:AAPL) reported on Monday morning that the company sold 5 million units of the iPhone 5 in the three days following the phone’s release to retail. Pacific Crest believes that this suggests that the company could ship as many as 8 million iPhone 5s in the September quarter, above their original expectation of 5 million to 7 million. In total, this prompts an increase to their FQ4 (September), F2013 and F2014 iPhone unit estimates.

In addition to the increase to their iPhone unit estimates, in their model they are slightly reducing their Mac unit estimates to account for weak global PC demand. They are also slightly lowering their FQ4 iPad unit estimate. However, Pacific’s F2013 and F2014 iPad estimates are unchanged and remain meaningfully dependent on a strong response to the iPad Mini, which  they expect to launch in October.

apple iphone and ipad gross margins historic

Higher estimates drive price target to $760 from $690. their $760 price target is based on 12.5x the analysts’ F2013 EPS estimate of $60.79. They even expect Apple Inc. (NASDAQ:AAPL)’s P/E multiple to contract toward their target multiple as the pace of growth likely decelerates.

Significant new products or services are likely necessary to drive meaningful upside to their new price target. Market saturation will dramatically slow growth for the iPhone and iPad beyond F2013. They believe this limits room for upside beyond their $760 price target unless Apple launches a new and massively profitable product or service.

Disclosure: No position