Expectations For Apple's Q3 Have Moved Higher, And Not Because Of The Galaxy Note Recall

Previewing Apple Inc. AAPL's fiscal year fourth-quarter results, Deutsche Bank said investors' expectations have moved higher, reflecting a beat and a potential raise.

Apple is due to release its fiscal fourth-quarter results on October 25.

Deutsche Bank attributed the upbeat expectations for iPhones on promotions by all four U.S. carriers in September, which drove stronger-than-expected initial iPhone 7 orders, which pulled demand forward.

Consequently, analyst Sherri Scribner raised the firm's iPhone estimate for the quarter to 46 million, premised on increased build plans at Asian suppliers and a boost from short-lived U.S. carrier promotions. The calendar year fourth-quarter estimate is pitched at 75 million.

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Deutsche Bank believes positive data points are already reflected in share price, which is up over 18 percent in the past three months. Although the SAMSUNG ELECTRONIC KRW5000 SSNLF Galaxy Note recall has helped sentiment toward Apple, the firm does not think Galaxy Note buyers are a significant opportunity for Apple, given the different ecosystem.

The firm expects positive iPhone comments to continue in the next one to two months, supporting shares into the year-end. Longer-term, the firm remains Market Weight on Apple, due to slowing smartphone growth and elongating refresh cycles in mature markets.

Premised on higher iPhone assumptions, the firm raised its 2017 and 2018 earnings per share estimate and also upped its price target to $108 from $105.

Deutsche Bank has a Hold rating on the shares of Apple.

At time of writing, Apple's shares were up 0.42 percent at $118.04.

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