Don't Be Surprised By Apple's Pullback

Although Apple Inc.'s (NASDAQ: AAPL) shares slipped 2 percent after hours, which followed a 21 percent price gain in the previous three months, versus a 1 percent decline in the S&P 500 during the same period.

Near-term demand for iPhones exceeds supply, while Applewood is in its early innings, Citi’s Jim Suva said in a report.

Applewood is the India focused push by Apple to showcase it can price and gain material share.

Suva reiterated a Buy rating on Apple, with a price target of $130. He mentioned that the company’s sales were returning to year-over-year growth, while “ASPs also alleviate fears of price reductions to stoke demand.”

Apple is expected to witness year-over-year iPhone growth in the December quarter, and the company is likely to launch a refresh of its Mac products at the October 27 event, Suva stated.

Results And Outlook

Apple reported sales of $46.85 billion, marginally missing the consensus expectation of $47 billion. EPS came in at $1.67, slightly ahead of the consensus estimate of $1.66. Gross margins of 38.0 percent came in-line with consensus.

iPhone units were down 5 percent year-over-year at 45.5 million, but were ahead of the consensus expectation of 44.8 million. ASP was at $619, slightly above consensus at $616

Apple projected revenues of $76-$78 billion for the December quarter, higher than the consensus of $74.88 billion. Gross margins of 38-38.5 percent, marginally missing the consensus of 38.8 percent. “We also note Apple typically guides conservatively,” the analyst wrote.

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