Wells Fargo Cuts Apple Estimates

“Our US carrier store checks in December indicated readily available supply of iPhone 7 and reasonable supply of iPhone 7 Plus except the 256GB model (1 week or so wait time),” Wells Fargo analysts mentioned in a recent Apple Inc. AAPL note.

December Quarter Expectations

Although increased supply could be partly responsible for the supply/demand balance into January, the analysts believe demand is also likely to have declined and therefore a more conservative stance had been taken for the March quarter.

However, the analysts also believe Apple should have benefited from the extra week in the December quarter, as well as iPhone seasonality, price cuts on the 9.6-inch iPad and 12.9-inch iPad Pro and the MacBook Pro refresh.

The gross margin for the quarter are expected to come in slightly ahead of the guidance range, although there is limited potential for any meaningful upside.

March Quarter Expectations

The analysts have reduced the revenue and EPS estimates for the March quarter, since the iPhone 7 and 7 Plus models are easily available in the United States, and expect Apple to lower its gross margin guidance for the quarter.

The revenue and EPS estimates for FY 2017 and 2018 have also been lowered.

“AAPL shares are at the high end of our valuation range and while there could be some positive news out of the AAPL supply chain, we see think March guide poses some risk,” the analysts added.