Apple Inc. (AAPL) Estimates Raised After iPad Unveiling: Goldman

Apple Inc. (AAPL) Estimates Raised After iPad Unveiling: Goldman
<a href="">ElisaRiva</a> / Pixabay

Since Apple Inc. (NASDAQ:AAPL) unveiled its new iPads earlier this week, analysts at many firms have been adjusting their estimates. The general consensus tends to be that average selling prices for the tablets will go up, while volume edges slightly lower. Goldman Sachs analysts provided updates to their models this week and reiterated their Buy rating and $560 per share price target.

Apple Inc. (AAPL) Estimates Raised After iPad Unveiling: Goldman

Apple’s pricing changes were the biggest surprise

Analysts Bill Shope, Elizabeth Borbolla, Cristina Colon and Justin Price were at Apple Inc. (NASDAQ:AAPL)’s big event on Tuesday. Like most others, they say the only big surprise at the event was the new pricing strategy Apple has adopted. The iPad Mini has a Retina display and now starts out at $399 for the Wi-Fi model or $529 with cellular capabilities. The previous iPad Mini started out at $329, although its price has been reduced to $299 with the launch of the new iPad Mini. There is also a 128 GB model which starts at $799 for the W-Fi model and goes to $929 for the one with cellular capabilities.

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The analysts believe demand for an iPad Mini with Retina display has been pent up, and as a result, could provide a tailwind for Apple’s tablet sales in this replacement cycle.

Apple’s iPhones doing better than expected

They also report that the two new iPhone models appear to be doing better than they expected, particularly because of a greater mix shift toward the higher priced iPhone 5S. When Apple Inc. (NASDAQ:AAPL) releases its third quarter results on Monday, the analysts are expecting to see shipments of 33.7 million iPhones during the quarter. Previously they were projecting sales of 32 million. That’s an 8% sequential increase and a 25.4% annual improvement.

The analysts increased their iPhone estimates after Apple announced it had sold 9 million iPhones over launch weekend. They raised it again after Apple’s iPad unit disclosure suggested that iPhone units were the bigger driver of its third quarter revenue results. Shope and his team said while the iPhone 5S supply remains constrained, they still think at least 4 million to 5 million units of the 9 million units shipped during the first weekend were the 5S. They’re expecting to see an average iPhone selling price of $562 compared to $581 in the previous quarter and $622 in the same quarter a year ago.

Apple estimates raised

Because of the higher starting price of the iPad Mini, the Goldman Sachs analysts have slightly increased their estimates for the 2014 fiscal year. They raised their full-year revenue estimate to $185.19 billion from $182.7 billion. Their earnings per share estimate increased to $44.35 from $44.11 per share.

For the September quarter, which will be reported on Monday, they’re expecting to see $37.1 billion in revenue and earnings of $7.93 per share. That’s compared to consensus of $36.8 billion in revenue and earnings of $7.89 per share.

Looking ahead to Apple’s December quarter

The analysts said one of the biggest segments of Monday’s report will be the guidance Apple Inc. (NASDAQ:AAPL) provides for the December quarter. They’re expecting earnings of $13.95 per share on revenues of $55 billion. That’s compared to consensus estimates of $55.5 billion and earnings of $13.82 per share.

The analysts note that while revenues are indeed a focus, gross margins have been a major source of buy side uncertainty. Their forecast for December is 37.7%.

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