Evercore Joins Firms Cutting Apple Inc. (AAPL) Price Target

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Apple Inc. (NASDAQ:AAPL) continues to be rated Overweight, Outperform, Buy and in some cases Strong Buy by leading analysts. However, we cannot talk in a similar tone when it comes to its price target. Over the recent past, analysts have been reducing their price targets on the stock and Evercore Partners Inc. (NYSE:EVR) is the latest to join the list of firms, as reported in our previous articles.

Evercore Joins Firms Cutting Apple Inc. (AAPL) Price Target

In a report published Wednesday, Evercore Partners Inc. (NYSE:EVR) analysts, Rob Cihra and Edison Yu, reduced their price target on Apple Inc. (NASDAQ:AAPL) stock from $775 to $750 per share, citing a slowdown in the March quarter and full year 2013 iPhone sales. However, the analysts did reiterate the stock at Overweight and also revised upwards their iPhone and iPad mini sales expectation for the December quarter.

In the report, the analysts wrote, “Apple is scheduled to report Dec-Qtr (FQ1) on Jan 23, and we see upside to consensus from a strong, rapid global iPhone 5 roll-out and booming launch of the iPad mini. However, seasonal iPhone slowdown into the Mar-Qtr, replacements growing to nearly 50% of FY13 units and rising iPad mini mix trim our FY13 estimates”.

According to estimates in the report, the analysts maintained their revenue estimate for the December quarter at $56.3 billion, representing a 21 percent year-over-year growth rate, or 56 percent growth from C3Q12 results. The analysts also increased their EPS estimate for the quarter by six cents to $14.27 per share, representing 3 percent growth rate year-over-year. These estimates are well above the consensus estimate of $54.7 billion in revenues and $13.46 EPS.

Nonetheless, the analysts raised the December quarter iPhone sales from 49 million to 50 million. This represents 35 percent growth rate year-over-year, or 86 percent ramp from the previous quarter sales. The iPhone 5 accounts for the majority of the anticipated sales, contributing more than 80 percent. There is no change on iPad sales units as the analysts opted to stick with their 24 million units. However, they did raise their estimates for the iPad minis from 8 million units to 10 million, despite the constraints in the supply. The analysts also cut their Mac sales estimates to 5 million units for the December quarter.

The analysts predict a rebound on Apple Inc. (NASDAQ:AAPL)’s gross margins going into the March/June quarters, which should be good for the stock. The margins are expected at around 39.2 percent in the December quarter, but should recover in the march quarter going forward to more than 41 percent.

The analysts wrote, “We continue to see the Dec-Qtr marking Apple’s trough at 39.2% (down 80bps Q/Q) before rebounding to >41% in the Mar/Jun Qtrs as iPhone 5 and iPad minis look to have already progressed up initial ramp/yield curves vs. severe Oct/Nov manufacturing constraints”. The analysts noted that the recent production cuts will impact negatively on revenues, but positively on gross margins.

Finally, the analysts cut their full year 2013 revenue estimates from $193 billion to $182 billion, representing 17 percent year-over-year growth, while EPS was reduced from $50.33 to $47.06 per share (7% Y/Y growth). The analysts point to the expected slowdown in March, following a cut down in iPhone production as a major reason for their outlook. Apple ramped exceptionally at the back-end of the Oct/Nov supply constraints, which might have contributed to high expectation on the march quarter. Therefore, the analysts are only modelling for a more seasonal March quarter.

At the time of this writing, Apple Inc. (NASDAQ:AAPL) stock was trading at $544.70 per share, down $4.33, or 0.79 percent decline from the previous close.

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