Corning product indicator of tablet market

Weaker than forecast non-iPad tablet demand, along with the completion of orders for the holiday season iPad buildup, have pushed Corning to lower its guidance for CY4Q, now down 25 percent from the previous quarter, reports UBS analyst Maynard Um in a note to investors. He estimates that Apple bought around 80 percent of the glass company's Gorilla Glass output through early December, making the company the major client for Corning and a leading indicator of iPad demand.

Um, who has estimated around 12 million iPad sales for the holiday quarter, said he does not plan to revise his conservative estimates on iPad sales or Apple stock because of the news. He believes there may be some ongoing shift back to the more traditional portable notebook sales, under the theory that consumers are still being hit by a sluggish economy and may not be able to buy "all iProducts simultaneously."

Because MacBook Pros were stronger than expected in the Sept quarter, Um believes that consumers may do some shifting back to "traditional form factors" if they have to choose only one device, but that such a shift -- if it exists -- won't materially impact Apple's bottom line.

Apple has forecast an unusually confident record quarter ending in December, predicting record sales of Macs and iPhones and an EPS of $9.30. Despite the confidence, analysts believe (and the historical record indicates) that Apple is underestimating, and that the true EPS could be as high as $11.80, meaning an 84 percent year-over-year growth rate and an overall CY11 EPS of just over $33.

Um is targeting a stock price for Apple at $510 based on a 14x multiple (11x including cash) of an estimated CY12E EPS of $35.60. He reiterated his 12M iPad estimate, but said that while UBS estimates iPads will be up eight percent sequentially, even a drop of 10 percent sequentually would have minimal impact on earnings per share (around one percent).

by MacNN Staff