Cantor Fitzgerald Equity Research analyst Brian J. White rates Apple Inc. (NASDAQ:AAPL) as a Buy as the tech giant will report its first quarter financial results this evening.

Apple Inc.

This evening (1/27), Apple Inc. (NASDAQ:AAPL) is scheduled to report its 1Q:FY14 (ended December) earnings results with a conference call at 5:00PM ET. After a difficult FY:13 that resulted in the first EPS decline since FY:03, we believe Apple will begin FY:14 on the right foot with a healthy report that supports our view the company can return to EPS growth in FY:14 and accelerate its innovation cycle. At the same time, Carl Icahn appears determined as ever to polish up Apple’s valuation as highlighted by last week’s shareholder letter, and we believe help is needed as the stock is trading at a paltry P/E of just 8.7x (ex-cash; or 11.6x straight) our CY:14 EPS projection vs. 15.0x for the S&P 500 Index.

Expectations from Apple

For 1Q:FY14, we believe Apple Inc. (NASDAQ:AAPL) will at least meet our revenue estimate of $58.6 billion and our EPS projection of $14.31, while delivering upside to the Street’s (FactSet Consensus) sales projection of $57.5 billion and EPS estimate of $14.09. Recall, Apple’s 1Q:FY14 sales outlook calls for revenue of $55-58 billion.

iPhone 5S and iPad Air: Key strength behind Apple

Despite Verizon Communications Inc. (NYSE:VZ)’s much weaker December quarter smartphone activation QoQ growth versus a year ago, Samsung’s weaker-than-expected smartphone sales in 4Q:13 and the slowest QoQ 3G mobile subscriber growth in China that we have on record, we believe Apple Inc. (NASDAQ:AAPL) can at least meet our 53.5 million iPhone unit estimate in 1Q:FY14 driven by strong demand for the iPhone 5S that we believe will positively influence the ASP. For the iPad, we believe Apple could exceed our 24.5 million unit forecast for 1Q:FY14 driven by strong demand for the higher-margin, higher-ASP iPad Air. We believe the first-generation iPad mini outsold the recently introduced Retina Display version in 1Q:FY14.

A seasonal 2Q:FY14 but China Mobile ramps

For 2Q:FY14, we are projecting sales of $47.2 billion and EPS of $11.43 versus the Street’s revenue projection of $46.1 billion and EPS estimate of $10.97. We are comfortable with our projections and the ramp with China Mobile Ltd. (ADR) (NYSE:CHL) provides a healthy tailwind, in our view.

Apple’s valuation

Our $777 price target is based on nearly 14x our CY:14 pro forma EPS estimate (adjusted for interest income/expense), plus Apple Inc. (NASDAQ:AAPL)’s net cash per share of $142.77.