Analytical Caution Surrounds Apple

Apple’s souring relations with the world’s biggest phone companies are expected to be brought into focus when the iPhone maker faces the analyst community this week.

Apple shares have swung wildly in recent trading as bulls and bears tussle, but both expect the company’s chief executive, Tim Cook, to report another set of soaring sales figures on Tuesday night. There are different views on what he will hint about future profitability of the iPhone.

In the US in particular, mobile carriers are trying to screw down the price they pay to handset makers.

The iPhone has been heavily subsidized by the carriers in order to attract gadget-savvy customers to their network, but now the companies are trying to promote alternative phones that run on Android and Windows operating systems, where they pay less.

Concern about this change was one of the reasons for the sudden reversal in Apple shares earlier this month, after the research firm BTIG abandoned its buy rating on the stock.

The firm said that, while Apple says it has sold about 33 million iPhones in the first quarter of the year, it may hint at a drop to 27 million next quarter.

In all, the forecast is for Apple to report revenues of $40bn for the three months to the end of March, juiced by sales of the new iPad 3 tablet.

Kevin Dede, analyst at Auriga, said: “Feedback has clearly been positive, and we suspect that expanded global distribution of the new model should help bolster sales rates while offering the iPad 2 at lower price points should contribute to the expansion of Apple’s tablet franchise.”

Apple’s shares have surged far and fast in 2012, from $400 at New Year, to $500 in February and peaking at $636 on 9 April. For a short period the next day, Apple was valued at $600bn, only the second company in history to hit that figure, after Microsoft at the peak of the dotcom bubble.

As well as the iPhone and iPad, Apple is winning market share in laptops and has also excited investors with plans, so far under wraps, to move into televisions, as the independent stated.

Bullish analysts point to Apple’s lowly price-earnings multiple to suggest that the shares can go much higher still, perhaps eventually above $1,000.

BTIG said “Investors should take a breather and take a moment to consider the changing dynamics in the post-paid wireless industry, which has seen margins squeezed by the frequent upgrade activity of iPhone customers, and the sustainability of a $600 iPhone and possible need for a price cut.”