For the March quarter, which the company will report after the close next Tuesday, Shope now sees revenue of $36.9 billion and profits of $10.18 a share, up from $34.2 billion and $9.36. (Consensus is $36.3 billion and $9.89.) For FY 2012, his new EPS estimate is $43.47, up from $42.52. For FY 2013, he now sees $53.94 a share, up from $50.57.
"Despite recent volatility, we continue to believe Apple’s shares are very attractive at current levels," he writes in a research note. "It remains our top pick, and we’d be buyers ahead of March-quarter results. We expect solid March-quarter upside, which is likely to trigger healthy increases in iPhone, iPad and overall earnings expectations for the full year. In addition, we believe recent investor concerns over a 'catalyst-light' June quarter are misguided, since this will be the first full quarter with a refreshed iPad, a lower-priced iPad 2, and a fully ramped iPhone distribution channel; in other words, the June quarter is when many of the recent catalysts begin to fully manifest into earnings power."
Shope asserts that recent Street concerns on soft Mac sales and potential iPhone subsidy reductions are both overblown.
"On the Mac side of the equation, we believe growth will be fairly lackluster this quarter, as both sell-in and sell-through pull back ahead of a broad Mac refresh," he writes. "Indeed, we now believe that annual unit growth will come in at 14%, versus last quarter’s 26% growth. With that said, we believe our estimate is above recently reduced investor expectations, as most seem to be underestimating how much international share gains will counter tepid U.S. growth. Furthermore, we expect any weakness in Mac sales to be more than countered by iPhone and iPad strength this quarter, and we expect growth to accelerate in the June quarter."
As for the potential for reduce iPhone subsidies, Shope concedes that this is an important issue for both Apple and telco investors. But he contends that the concern is overdone.
"While some carriers will attempt to reduce the subsidy burden and tighten upgrade policies, many more will likely hold steady to capture share," he writes. "In the end, all carriers are attempting to migrate their installed bases from feature phones to data-centric smartphones, and amid this transition, we think the risk of losing market share in the iPhone sub-segment is likely to be too great to ignore. On a shorter-term basis, we believe the building rhetoric for lower subsidies and tighter upgrade policies is likely to fade to a whimper, as vendors prepare their marketing strategies for the iPhone 5 refresh later this year. Indeed, the iPhone 5 launch is likely to be one of the most important smartphone product cycles we’ve seen to date, and we find it very hard to believe that a large number of carriers will lower subsidies and risk share loss during this launch."
AAPL this morning is up $7.62, or 1.3%, to $617.32.
