Apple, Inc. To Have Poor Q2 Ahead Of iPhone 6 Product Cycle?

Apple Inc. (NASDAQ:AAPL) has been reiterated with a Buy rating, and the estimates have been revised by Jefferies analyst Peter Misek on Thursday, even though the analyst sees some near term risk in the iPhone consensus estimates for the second quarter.

Second quarter a transitional one

The analyst considers the second quarter to be a transition quarter followed by a robust iPhone 6 product cycle. Apple Inc. (NASDAQ:AAPL) iPhone 6 will be a major product in the cycle replacing Apple’s 5-inch product gap. The analyst expects the iPhone 6 to be launched from late June to September and most likely in August.

“Our latest checks continue to indicate that despite Apple desire to launch the iPhone 6 in late June/early July that an August time frame is more likely and Sep is even possible,” Misek comments.

Misek has lowered the second quarter iPhone estimates from 36 million to 33 million compared to the consensus estimate of 33 million due to builds in the 25-30 million range. Misek notes that suppliers would keep on giving pricing concessions to Apple Inc. (NASDAQ:AAPL), which in turn would increase the margin.

Apple iPhone 6 gross margin to be lower

He added that the initial BOM estimates suggest the iPhone 6 gross margin could be somewhere in the range of 175-450 basis points below than the iPhone 5S with increased prices for components like the display and app processor, which will partially be counterbalanced by general 5%-10% price concession. The estimates include assumptions of a decline of 430 basis point, which is “conservative unless some of the components run into yield issues.”  For the fourth quarter of 2014, Misek noted iPhone ASPs of $597 compared to $637 in the fourth quarter of 2013.

Ratings from other analysts

Separately, other equity research firms have also assigned ratings on the stock. Zacks analysts maintained Neutral rating on the stock in a research note on February 5th. They have set the price target of $534.00 on the stock. Analysts at Thomson Reuters/ Verus have upgraded the share to Buy in a research note to the investors on January 31st. They now have a $650.00 price target on the stock. Apple Inc. (NASDAQ:AAPL), presently has a consensus rating of Buy and a consensus target price of $598.08.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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