Apple Inc.: Expect steady results but limited financial upside and an elevated valuation creates a tricky set-up

Research evidence excerpt

Apple Inc.: Expect steady results but limited financial upside and an elevated valuation creates a tricky set-up

we estimate Apple took share in the US, Europe, and China,

Q3E 1.84 1.89

the three largest smartphone markets.

Q4E 2.02 2.02

Second, as component prices have risen, notably memory, demand for higher 09/26E 8.72 8.77

priced smartphones has been stronger than both the mid-range and low-end 09/27E 9.57 9.72

segments of the market in part given memory allocation decisions. 09/28E 10.52 10.82

David Vogt

That said, although we expect a solid iPhone quarter, we believe the market is likely Analyst

discounting even stronger results given Apple shares are trading ~35x NTM consensus david.vogt@ubs.com

EPS estimates, a less than favorable risk/reward in our view. +1-212-713 4296

Andrew Spinola

Expect June GM in-line and Sept guided to down QoQ Analyst

For the June quarter, we forecast gross margin of 48.0% (VA Cons 48.0%) vs the guide andrew.spinola@ubs.com

of 47.5%-48.5% reflecting several factors that largely offset. First, higher contract +1-212-713 3766

memory pricing should weigh on iPhone gross margin in the June quarter relative to the Brian Luke

March quarter. As a modest offset, June quarter iPhone gross margin should benefit Associate Analyst

from the final batch of lower cost inventory (memory) flowing through COGS. brian.luke@ubs.com

Therefore, the net effect drives our iPhone gross margin forecast to ~39.5% in the June +1-212-713 3819

quarter, down roughly 250 bps sequentially (VA Cons 39.7%).

Highlights (US$m) 09/23 09/24 09/25 09/26E 09/27E 09/28E 09/29E 09/30E

Revenues 383,285 391,035 416,161 476,745 509,630 540,002 566,036 582,980

EBIT (UBS) 114,301 123,216 133,050 155,119 165,779 177,995 187,951 193,901