Apple Inc. (NASDAQ:AAPL) is finally getting some love after a ‘fallout’ with Wall street. However, Shaw Wu an analyst at Sterne Agee  is still a bit cautious. In a report today he notes that Sterne Agee is cutting their PT and estimates for Apple Inc. (NASDAQ:AAPL). However, Wu is still bullish on the company.

Shaw Wu a tech analyst at Sterne Agee notes that supplier checks build plan reductions for iPhone likely due to an inventory drawdown ahead of refreshes in the 2H. In addition, he sees evidence of sourcing activity for what appears to be iPhone 5S and a lower-cost iPhone using composite material casing. Sterne Agee is reducing their iPhone forecast but leaving iPads and Macs intact. With 2 weeks left, he believes that Apple Inc. (NASDAQ:AAPL) will likely hit the lower end of its guidance. Wu notes ‘the good news is this is better than most expecting a miss.’ Further details from the report below:


1. Investors Looking for Answers. With Apple Inc. (NASDAQ:AAPL) shares off nearly 40% from its 52-week high, many investors have asked the firm’s take on the state of affairs at the company. Unsurprisingly, they continue to see cuts to iPhone build plans as demand has turned out weaker than expected but more importantly, what appears to be likely an inventory drawdown ahead of iPhone refreshes in the 2H.

2. iPad and Mac Expectations Seem Reasonable. For iPad, the picture is different where Wu is seeing continued strong iPad mini momentum offset by weaker full-sized iPad 4 trends. He believes we could see the cross-over point where iPad mini outsells iPad. For Macs, his sources indicate better than seasonal demand helped by better availability and yields on the new iMac.

3. Details. The firm is reducing their iPhone unit forecast to 32.5 million (from 35 million) vs. consensus at 35-36 million. They are leaving their iPad unit forecast unchanged at 18.5 million (consensus at 18-19 million) and Mac unit outlook at 3.85 million (consensus at 3.8-3.9 million).

4. Estimate Changes. For the March quarter,  they are now at $41.3 billion in revenue and $10.00 in EPS (from $42.9 billion and $10.25 in EPS) vs. consensus at $42.9 billion and $10.21. For FY13, $180.5 billion and $44.50 in EPS (from $187.4 billion and $47.05 in EPS) vs. consensus at $182.2 billion and $44.32 in EPS and for FY14, $206.8 billion and $52.00 in EPS (from $213.6 billion and $55.00 in EPS) vs. consensus at $205.7 billion and $49.97 in EPS. Their new price target is $630 (from $715) based on what  is a reasonable 9x multiple on their CY14 EPS of $53.84 plus $145 in net cash.

5. Bigger iPhone Refresh Not Likely Until 2014. Wu believes Apple Inc. (NASDAQ:AAPL) is leaving money on the table by not participating in larger touchscreen form factors dominated by Android vendors. But more importantly, he believes Apple Inc. (NASDAQ:AAPL) needs to reclaim high-end leadership as that is what its brand is about. In supplier checks, he sees evidence of a larger form factor iPhone being worked on but given its early stage, he doesn’t believe  will see it ship until 2014.