Sterne Agee's Shaw Wu has issued a new report on Apple, raising his iPhone unit estimates while lowering iPad estimates reports Apple 2.0. Additionally, Wu has cut his revenue estimates slightly while increasing his gross margin estimates for Apple's holiday quarter.
Wu says iPad mini demand is strong but sales are limited by supply constraints and he sees the mini cannibalizing full-sized iPad sales. iPhone sales will grow because of improving manufacturing yields and increased availability.
We believe AAPL shares will likely continue to be volatile until year end due to non-fundamental factors including profit taking as AAPL as been an outstanding performer in 2012 where many are opting to lock in gains and fears of higher "fiscal cliff" tax rates next year. However, we believe as we enter 2013, investor sentiment will likely shift back to fundamentals. 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.