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Apple: UBS Cuts Ests; Slices Target To $650 From $700

This article is more than 10 years old.

UBS analyst Steve Milunovich sliced his estimates for Apple for both FY 2013 and FY 2014 to reflect the findings of a new survey by Consumer Intelligence Research Partners that finds customers shifting to cheaper iPhones with less memory.

For FY 2013, he now sees profits of $44.68 a share, down from $47; for FY 2014, he goes to $52.80, from $55.85. Milunovich maintains his Buy rating on the shares, but trims his target to $650, from $700.

The survey, according to Milunovich, reached some surprising conclusions:

  • Demand for storage has declined from about 30 GB with the 4S to 20 GB for the iPhone 5, with fewer customers choosing the 64 GB model.
  • Demand for older models has increased to 50% in the iPhone 5 cycle to date, compared with 33% in the 4S cycle.

Milunovich contends that the iPhone gross margin could be hurt by 8-10 points by "the downward mix shift and higher launch costs in FY 2013."

He sees a 2%-6% drop in iPhone ASPs in the next three quarters; in response he reduced his gross magin forecast by one full point for the current fiscal year.

"Still, we maintain our Buy rating in the belief that risk-reward is favourable given improving growth, a China Mobile deal by calendar Q4, and skepticism about innovation," he writes.