UBS analyst Steven Milunovich says that this shift to lower priced units combined with higher launch costs could cost Apple a reduction of 8 to 10 percentage points in gross margin in fiscal year 2013. As a result, the analyst now expects fiscal year 2013 profit of $44.68 a share, down from $47 previously estimated. For fiscal year 2014, he sees Apple reporting profit of $52.80 a share, down from his earlier forecast of $55.85 a share. Milunovich has cut his target on Apple's stock to $650 from $700 while keeping his "Buy" rating on the shares.
Milunovich see's a 2% to 6% drop in the phone's average selling price over the next three quarters, reducing his gross margin forecast by 1% over fiscal year 2013. His buy rating is based on a positive risk/reward ratio at current prices. He sees strong growth, a deal with China Mobile by the fourth quarter, and too much pessimism about Apple losing its edge in innovation, pushing the stock higher.
source: CIRP via Forbes