Apple price target cut at UBS on iPhone selling price worries

Apple customers are buying less memory and older iPhones, analysts say.

UBS analysts have cut their estimate of the average selling price for Apple iPhones and reduced their earnings estimate and price target for the stock.

Steven Milunovich,  Peter Christiansen, and John Roy cite survey data showing that demand for storage has fallen from around 30GB with the older iPhone 4S model to 20GB with the iPhone 5. In addition, fewer customers are opting for the 64GB models of the newer phone, and demand for older models has risen from 33% in the 4S product cycle to 50% in the iPhone 5 cycle so far.

The analysts say iPhone’s gross margin could suffer 8 to 10 points because of the downward product shift and higher costs of launching the new phone.

“We maintain our Buy rating in the belief that risk-reward is favourable given improving growth, a China Mobile deal by C4Q, and skepticism about innovation,” they wrote in a note Tuesday.

The analysts cut their fiscal 2013 earnings per share estimate to $44.68 from $47. They cut their price target to $650 from $700.

Apple is slated to report its latest quarterly results on Wednesday.

– Tom Bemis

Source marketwatch.com