Could Apple Cut? UBS Concerned About June Guidance

Despite maintaining a Buy rating on Apple Inc. (NASDAQ: AAPL), UBS's Steven Milunovich has raised a few concerns regarding the stock. As indicated from a recent CIRP survey, Apple users are not upgrading their phones as frequently.

"The 6s cycle continues to be mediocre in terms of installed base upgrades. First 69 percent of iPhone buyers in the quarter were upgrading from an iPhone, lower than 76 percent in the prior quarter and 72 percent in the same quarter last year," Milunovich explained.

The survey further showed the installed base upgrades have experienced moderation, "as iPhone users hang on to their phones longer."

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This slowdown in upgrade tendencies has led the analyst to expect weaker sales figures, and weak iPad sales as well. However, the analyst noted, "The mix is improving," citing two-thirds of shipments are comprised of newer models.

That being said, UBS sees Apple continuing to take share, "The proportion of buyers switching from Android increased to 23 percent, the highest in over a year."

June Guidance

For the June quarter, UBS has listed four estimates and four observations going forward.

• Observation 1: Likelihood of positive catalysts have incrementally decreased as "Apple is in the seasonally weak half of its earnings year."
• Observation 2: Upside possible to $652 iPhone ASP "given survey results that suggest a positive mix shift."
• Observation 3: The outlook for June's quarter "could be weak."
• Observation 4: Stock reaction to the upside is seen as more likely than to the downside.
• Estimate 1: Revenue estimated below the Street's figures ($52 billion) at $51.8 billion is within the company's range of $50–52 billion.
• Estimate 2: EPS estimate is two pennies below the Street's EPS estimate of $2.00, coming in at $1.98.
• Estimate 3: iPhone units' estimate at 52 million comes in slightly above the Street's average estimations, but UBS' numbers for iPads and Macs are below the Street's figures.
• Estimate 4: June's iPhone estimate raised to 48 million "because of the SE, but that figure could be too high given recent supply chain comments."

UBS has a 12-month price target of $120.00 on Buy-rated Apple.