Sterne Agee's Shaw Wu Says Apple iPhone Sales to Beat Estimates

With iPhone 5 availability improving, Stern Agee analyst Shaw Wu expects Apple will report quarterly sales figures than come in above current estimates. Full-size iPad sales, however, may take a small hit thanks to iPad mini cannibalization.

Improved iPhone 5 availability means more salesImproved iPhone 5 availability means even more sales

"We continue to pick up improving yields and availability of iPhone 5 and thus improving profitability. As we said before, this is due, in part, in preparation for a broader global launch in China, Brazil, Russia, Taiwan, and more than 50 other countries this Friday, December 14," Mr. Wu said. "iPad mini demand remains strong but shipments appear limited by supply constraints. On the other hand, build plans for iPad appear to have been reduced likely due to some cannibalization by iPad mini."

Mr. Wu is now expecting Apple to sell 47.5 million iPhones for the quarter, up from 47.3 million, while Wall Street consensus sits between 45 and 46 million units. His iPad estimates are now inline with Wall Street's 23 to 24 million units, coming in at 23.5 million. He previously projected 25 million iPads for the quarter.

While Mr. Wu is fairly optimistic on iOS-based device sales, he isn't expecting big surprises from Mac sales. His estimates come in below Wall Street's 5.2 to 5.3 million with only 5 million units.

Apple's gross margins estimates are up from his earlier prediction of 38.5 percent to 38.7 percent.

"We are at the beginning of two big product cycles that will likely last 3-5 quarters and see margins poised to improve with greater scale and improving yields. In addition, we will likely see margin accretive mid-cycle refreshes in [the second half of 2013]," he said.

Mr. Wu is now projecting Apple will report $54.5 billion in revenue with a $13.70 EPS, down from his earlier $54.6 billion estimate. For fiscal 2013, he lowered his revenue estimate from $193.4 billion to $192.6 billion with a $49.50 EPS.

Mr. Wu is maintaining his "Buy" rating and $840 target price for Apple's stock. Apple is currently trading at $537.90, down 3.48 (0.64%).