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Apple will report results on Wednesday, Jan 23  The company is expected by some to deliver upside to iPhone forecasts while iPad shipments, revenue and ASPs will likely be below expectations. For F2Q13, there is material downside to forecasts as expectations for iPhones and iPads need to move lower.  Analysts expect Apple to report revenues and EPS around of $54.8B and $13.44 and guidance of $52B and $11.75. For gross margin, consensus calls for 38.5-39.0%, which is 2-3 percentage points above guidance of 36%.

Apple Inc. (NASDAQ:AAPL) is expected to report iPhone shipments of ~47M. iPhone shipments gained from price reductions of the iPhone 4S and 4 as well as expanded distribution and alleviation of supply constraints for the iPhone 5. For iPads, revenues could fall short due to fewer shipments and lower ASPs. The segment will experience a greater mix of iPad 2 and iPad mini but supply constraints impacted iPad minis.

The company could experience a meaningful sequential drop in iPhone shipments due to normal seasonal downtick as well as fulfilment of pent-up demand associated with the new product release in the December quarter. For iPads, while there is slight downside risk to the unit volume forecast, the segment’s ASPs should also move lower. Analysts expect the company to guide quarterly revenues and EPS around $39B and $9, respectively. For gross margin, management is likely to call for a modest sequential improvement.

After touching $700 in September 2012, Apple Inc. (NASDAQ:AAPL)’s stock has moved down by 26% to $520 as investors have become concerned about the company’s ability to drive growth with the current product set. Additionally, the competitive environment for the company is also becoming more intense as a significant portion of growth is happening at the lower end of Apple’s end markets. As such, the company will either be unable to participate in the growth or face pricing and profitability challenges.

While many agree with all the challenges facing Apple Inc. (NASDAQ:AAPL) at this point and they are likely reflected in the current price, many believe that the current valuation of 10x earnings or 8x earnings excluding cash balance is attractive for a company offering 2% dividend yield, strong customer following, market leadership in the emerging mobility space, and double digit earnings growth. With analysts cutting their price targets for the tech giant over the past few weeks, even hitting forecasts could give the stock a big boost upwards.