Citi Comments On Apple's Stellar Quarter

Citi is reiterating its Buy on Apple AAPL shares and raising the 12- month target from $390 to $415 to reflect a significant increase in earnings estimates. Citi is raising iPhone, iPad and Mac estimates for 2011 and 2012. The company enjoyed good growth in all product categories (except iPod nano and shuffle). While iPhone shipments of 16.2M were below Citi's revised estimate of 18M, mgmt. cited a significant backlog exiting the quarter. iPad units were slightly above the high-end of street expectations of 6-7M units. The MacBook Air looks to be a big initial success. Gross margins of 38.5% was well above Citi's and the Street''s guidance, primarily due to more favorable component pricing. Citi saw QoQ improvement in GM in most products, but especially pleased to see iPhone margins rebound several hundred basis points following last quarter's steep drop. GM guidance for the March quarter looks conservative given continued component price declines and favorable mix. Citi doesnt believe that Apple conceded anything on iPhone wholesale pricing upon going multi-carrier in the U.S. AAPL closed Tuesday at $340.65