iPads also expected to do well through 2011

Analyst Shaw Wu of Sterne Agee has raised his estimates of iPhone 4 and iPad sales in the quarter ending in September based on checks with parts of Apple's global supply chain, and has reiterated his "Buy" rating, indicating that he expects Apple to continue outperforming the market with September results and over the next 12 months. With the next iPhone predicted for an October launch, Wu believes both iOS products will continue a strong run through the rest of the year.

The iPad will continue to sell stronger than expectations due to increased ability to fill orders, which have been either moderately or severely constrained since the iPad 2's introduction last March. LG was able to overcome a critical panel quality issue that will allow them to dramatically ramp up their ability to supply the top-quality displays that Apple demands.

Wu was surprised at the continuing strong demand for the iPhone 4 in the face of the "well known" news that a new model (and a strong possibility of new carrier options in the U.S.) will be arriving soon. He described the current iPhone market as having "unexpected strength" which went against Sterne Agee's predicted model of a "pause and inventory drawdown" ahead of the refresh. Wu now believes full-scale production of the next iPhone will occur in mid-to-late September with an October release.

As a result, Wu has raised forecasts to 18.5 million iPhones (up from 15.7 million) for Apple's fiscal fourth quarter, which ends on September 30th. He also predicts 12 million iPads (up from 10.4 million) for the same period. Mac sales remain unchanged with a predicted 4.1 million units sold, but gross margins are expected to rise to 41 percent (up from 39 percent) due to continuing strong iPad and iPhone sales and profitability.

Wu believes Apple will report $29 billion in revenue and $7.47 in earnings per share (EPS), slightly higher than the consensus estimates of $28.7 billion for revenue and $7 EPS. For its part, Apple's guidance for this quarter was to be $25 billion in revenue and $5.50 in EPS. For Apple's entire fiscal year, Wu believes the company will reach $109 billion in revenue and $28.10 in EPS, again slightly higher than consensus.

Despite former CEO Steve Jobs' resignation, Wu sees increases for FY2012, up to $131 billion and just over $33 in EPS. Sterne Agee has set a 12-month target price on the stock at $500 per share based on its "conservative" 12x multiple of earnings to share price. As recently as July, the company was expecting $27.7 billion rather than $29 billion in Q4 revenue.

by MacNN Staff