BMO analysts have revised their previous estimates on Apple Inc. (NASDAQ:AAPL) considering better than expected demand for the new iPad Air. The changes have been made on the basis of three primary estimates, namely more iPads in the December quarter, higher average selling price and fewer iPhones. Analysts Keith Bachman, Jung Pak and Gaurav Gupta have also lowered the earnings per share (EPS) estimate for Apple Inc. (NASDAQ:AAPL).

Apple Inc. AAPL

EPS estimate lowered for Apple

Apple Inc. (NASDAQ:AAPL) FY2015 EPS estimates have been lowered by analysts from $47.65 to $46.60 compared to the consensus estimate of $47.80. Analysts believe the “key near-term issue is the timing of China Mobile, which they feel “will help with growth in the March 2014 Q.”

The average selling price has been updated from $428 to $469 for the December quarter, and from $431 to $461 in the FY2014 based on higher mixed estimates for the iPad Air and higher ASPs for the iPad mini.

Much depends on China Mobile

The report notes that the factor with most weight for now is China mobile, which is expected to add to growth in the March 2014 quarter. After normalizing the contributions from the three Chinese carriers and NTT DOCOMO, quarter on quarter iPhone unit decline is around 22% in March for 2014 quarter, which is almost in line with March 2013 quarter.

The analysts note that if they are wrong regarding the timing and magnitude of China Mobile in March 2014 quarter, then iPhone estimates will drop. Also, the numbers of LTE base stations are few, at present, in China Mobile, reflecting that iPhone impact will be prominent in the first half of financial year 2014 instead of 2013 last quarter.

Numbers in support of China Mobile

China Telecom and China Unicom contributed significantly to quarter on quarter growth in the March 2013 quarter. In the March 2013 quarter, iPhone units increased to 6.9 million from 5.0 million units in December 2012. Unit sales for China Telecom, China Unicom and NTT DOCOMO will boost the December quarter performance in 2013.

China Mobile, according to the analysts, will contribute significantly in March 2014 quarter. iPhone garners 7% to 8% share of the Chinese smartphone market. According to the estimates, China Mobile has a subscriber base of approximately 170 million 3G users, which indicates that Apple Inc. (NASDAQ:AAPL) can clinch 12 to 14 million units in the first year of iPhone sales. Also, China Mobile has approximately 30 million iPhone users, and if half of them buy the new iPhones in the first year then it will contribute around 15 million units in fiscal 2014.