Analyst Meets with Apple, Reiterates “Buy” Rating

UBS analyst Maynard Um met with Apple’s management “recently,” and came away from that meeting reiterating his “Buy” rating on the company’s stock and his US$365 price target. Mr. Um said the focus of his meeting was on somewhat mundane aspects of Apple’s business (as opposed to Apple showing him super secret and über cool new devices), and while he didn’t specify the results of those talks, he came away believing Apple will still have a good holiday quarter and could improve its gross margins.

“Key areas of focus were on supply, gross margins, capital expendtitures, supply agreements, et al,” Mr. Um wrote in a research note obtained by The Mac Observer. “We still anticipate strong holiday demand across Apple’s portfolio and see 2011 catalysts including CDMA iPhone, 2nd generation iPad, and iPhone 5.”

In the ever-important question of gross margins, Mr. Um said that Apple could see an improvement in future gross margins due to warranty accrual reversals. In other words, Apple might be able to add money back into the books it had previously accounted for during the September quarter as future warranty claims.

“Though management did not explicitly quantify the impact or outlook of warranty accruals to gross margins,” he wrote, “we still believe there was a material impact in the September quarter, which, barring unusually high returns, should result in accrual reversals.”

He also noted that Apple has a strong track record in lowering the cost of its material and parts, and believes that the company will see other gains in gross margins going forward.

Lastly, Mr. Um confirmed with Apple that the company had improved supply of its iPad, and said that he expects the device to see strong demand going forward.

Shares in Apple traded higher in the mid-morning session Monday, at $308.77, a gain of $0.74 (+0.24%).

*In the interest of full disclosure, the author holds a small share in AAPL stock that was not an influence in the creation of this article.