Sterne Agee Sees Strong Q2 iPhone & iPad Sales, Macs Light

Sterne Agee analyst Shaw Wu told clients on Friday that he expects Apple to report a strong March quarter when it reports on April 24th. Mr. Wu believes that iPhone and iPad sales will drive the quarter, but that Mac sales are going to come up lighter than expected.

“Based on our supply chain checks, we anticipate a sizeable EPS beat based on iPhone and iPad strength despite Macs likely coming in a little light,” the analyst wrote in a research note obtained by The Mac Observer. “We believe concerns over slowing iPhone and iPad momentum are overdone and are buyers on recent share weakness.”

Mr. Wu bumped his iPhone estimates for the March quarter, Apple’s second fiscal quarter, to 28.2 million on March 20th, up from 26 million. On April 11th, he raised iPad estimates from 11.5 million units to 12.3 million.

“Since then,” he wrote, “our follow-up work indicates there is still room for [iPhone] upside despite consensus estimates moving up a bit. We believe concerns of [Verizon] iPhones coming in a little low are overdone. Keep in mind [Verizon] is one of what we estimate to be 150 iPhone carriers.”

Earlier this week, Verizon reported sales of 3.2 million iPhones, slightly lower than expected, but that figure was just over half of the 6.3 million smartphones the company sold.

For the March quarter, Mr. Wu is raising iPhone estimates yet again to 29.5 million. His iPad forecast stands at 12.3 million units, and he lowered his Mac estimates from 4.7 million units to 4.3 million.

He is also raising his gross margin estimates to 43.5 percent, up from 43.2 percent (Apple guided for 42 percent). He cited the larger mix of iPhone sales as the catalyst for the increase.

All of this comes together in new revenue estimates of $36.8 billion, up from $36.4 billion. Earnings per share estimates are now $10.20, up from $9.99.

He maintained his $750 price target on the stock and reiterated his “Buy” rating. As noted above, he said the he is a buyer on recent share weakness.

Speaking of weakness, Mr. Wu’s note was not enough to stem losses for AAPL. The stock ended the weak at $572.98 per share, down $14.46 (-2.46 percent), on strong volume of 36.8 million shares trading hands.

The stock is down $63.25 (down 9.94 percent) from the all-time closing high of $636.23 set on April 9th. At the same time, it is up $167.98 from its close of $405 on December 30th, for a gain of 42.5 percent in 2012.

*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.