“We are not proud modeling 18.5 million iPhones which turned out higher than actual 17 million shipments,” Mr. Wu wrote, “but we were materially below consensus of 20 million, not to mention some analysts who assumed as high as 23 million units.
He added that, “It turned out that a concern we raised in our [September 21st] earnings preview that [Wall Street] didn’t factor in enough of a ‘product transition’ that [Apple] talked about was valid (which turned out to be iPhone 4S launching in October).”
On the positive side, Mr. Wu looked at Apple’s aggressive guidance of US$37 billion in revenue and earnings per share (EPS) of $9.30 for the December quarter as a good sign. That guidance was actually higher than Wall Street’s own estimates of $36.6 billion in revenue and EPS of $8.98 for the December quarter.
“This is also rare as AAPL usually offers conservative guidance,” Mr. Wu noted. “We believe the company did this to express confidence in its strong pipeline of business, particularly with its new iPhone 4S and iPad still relatively early in its adoption curve.”
In light of Apple’s higher guidance, Mr. Wu raised his own estimates for Apple to $37.1 billion in revenue for the December quarter and EPS of $9.52. For fiscal 2012, he is now estimating $132.3 billion in revenue and and $34.00 in EPS, and that’s only modestly up from revenue of $131.3 billion and $33.10 in EPS. Consensus is currently at revenue of $135.3 billion and $33.05 in EPS.
Mr. Wu maintained his price target for Apple’s stock at $500 with a “Buy” rating.
He wrote, “We could raise our price target based on our higher estimates and higher cash balance but we are opting to leave our price target intact at $500 based on a conservative 12x multiple on our calendar 2012 estimates of EPS of $35.44 plus $87 per share in net cash.
The markets punished Apple during Wednesday’s trading session. As of this writing, AAPL is trading at $399.27, down $22.97 (-5.44%), on heavy volume.
*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.