One Analyst Signals Caution and Cuts Estimates On Apple (AAPL, T, VZ, S)

Apple Inc. (NASDAQ: AAPL) may have pulled back but this is still the darling of America.  Most analysts have stepped all over themselves to raise their estimates and their price targets all the way up.  So what about when a research call maintains and Outperform rating but cuts its estimates?

Credit Suisse did maintain an Outperform rating and kept its $750 price target, but the firm’s analyst effectively telegraphed that Apple is now vulnerable to slower U.S. smartphone growth and that is why the firm is lowering its estimates.  The calendar year 2012 and 2013 are seeing earnings estimates cut by 3% and 5% to $49.34 EPS and $59.15 EPS, respectively.

We would note that these estimates are above consensus targets as the Thomson Reuters estimates are $47.01 EPS for 2012 and $53.88 EPS for 2013.  The caveat is that those are September year-end targets.  What is interesting is that Credit Suisse raised estimates and ratings on AT&T, Inc. (NYSE: T) and Verizon Communications, Inc. (NYSE: VZ) to Outperform.  This report is also on the heels of a Sprint Nextel Corporation (NYSE: S) disclosure that it was cutting CEO Dan Hesse’s pay and incentive package to not include any gains from the iPhone for Sprint.

The note says, “While we see a weaker near term outlook given carrier pressures, with an ability to execute and innovate across the compute market, we believe that Apple will see robust bottom-line growth of 40%/20% in CY12/CY13, making the current valuation compelling.”

The underlying concern is that the leading US carriers may implement tougher smartphone upgrade policies or introduce extra costs.  Credit Suisse said, ” we believe that it will have an impact on Apple with 38% of iPhone volume coming from NA and with the company having a dominant 43% market share in NA over the past six months. In addition, given the carriers’ changes in upgrade policies and a desire to save on costs, Apple is perhaps more susceptible than other vendors near term. We have erred on the side of caution and lowered our iPhone estimates for CQ212/CQ312 to 28.5mn/26.5mn but maintain our view around a strong ramp in CQ412 to 50.3mn. Given low smartphone penetration, carriers’ inability to ‘collude’ for a sustained period of time, and the roll out of LTE/4G technology, we believe that these pressures on iPhone volumes may be a short term phenomenon.”

Credit Suisse did note that Apple had 19% smartphone share in 2011 but it believes that Apple can expand its share to 21% in 2012 and 22% in 2013.

Apple shares are indicated down 1.35% at $562.80 and the 52-week range is $310.50 to $644.00.

JON C. OGG