Apple Inc. (NASDAQ:AAPL)’s recent volatility could continue if analysts at Bank of America Merrill Lynch are correct. In a report issued to investors on Wednesday, they lowered their price objective and estimates for the company’s first quarter of 2013, citing “greater uncertainty” in demand. BAML analysts’ expectations are less positive than those of Morgan Stanley or Sterne Agee.


BAML analysts have set their price objective at $630 per share, down from their previous objective of $720 per share. They said they cut their expectations for profit margins to reflect lower sales volumes, promotions, and “mix within certain products.” They believe the volatility of Apple Inc. (NASDAQ:AAPL)’s stock could continue until Wall Street’s estimates indicate “a more subdued outlook.”

With these new estimates, BAML said they have factored in uncertainty and believe that the downside is limited compared to the upside of the stock. They do note that during the fourth quarter of 2012, Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) reported record iPhone sales. However they also took into account the aggressive promotions that took place during the holiday shopping season. They don’t believe the discounted prices were entirely subsidized by the retailers, so they expect Apple’s profit margins to be affected.

However they expect the company’s margins to continue improving throughout the company’s 2013 fiscal year as it improves its product yields. The analysts do believe that future product cycles for the company could be shortened as it faces off against stiffer competition. That would have a negative impact on profit margins if it happens. They also expect Apple Inc. (NASDAQ:AAPL) to introduce a cheaper iPhone “to tap the low-end market,” which would also be negative for profit margins.

In addition to lowering their price objective for the stock, BAML analysts also lowered their estimated earnings for 2013 to $186 billion from $192 billion. They lowered their earnings per share estimates from $50.22 per share to $47.20 per share for 2013.

Shares of Apple Inc. (NASDAQ:AAPL) rallied on Wednesday after dipping below $500 per share on Tuesday. They closed at $506 per share, an increase of about 4 percent since market opening on Wednesday.