As the AAPL Turns: Merrill Cuts, Cowen, Wedge Raise, Morgan Stanley Stands Pat

 

It’s been a busy day, yet again, for Apple (AAPL) analysts, both bull and bear, as the Street continues to ponder the prospect of lower rates of growth, prospects raised anew over the weekend by articles in the The Wall Street Journal, and�Japan‘s Nikkei News Service, regarding rumored cuts to production of the iPhone for this quarter.

The shares today are up $20.70, or 4%, at $506.62.

Today’s notes follow a raft of paper from bulls yesterday defending the stock, but also a warning of downside to $400 from Nomura Equities Research’s Stuart Jeffrey.

As I mentioned earlier, Pacific Crest’s Andy Hargreaves cut his rating on the stock to Sector Perform from Outperform, warning that the expectations for how great a slice of the world’s population the iPhone can rack up are too high.

Merrill Lynch’s Scott Craig reiterates a Buy rating, while cutting his price target to $630 from $720, after cutting his estimates to reflect concerns about weakness overall economic weakness affecting U.S. and European consumers, and rising smartphone competition. While the production cuts reported by the Journal and Nikkei are “now new” in his view, the prospect of heavy discounting of the iPhone and worse mix of SKUs sold this holiday cause him to ratchet down expectations:

We are cutting margins to reflect lower volumes, possible iPhone promotions in retailers (Apple sharing in the promotions), and mix within certain products (mostly iPad) [...] Both AT&T and Verizon recently reported record C4Q12 iPhone results. However, aggressive retail iPhone promotions during the holiday season, which we believe are not entirely subsidized by these retailers, drove less favorable mix and margins.

Craig cut his fiscal 2013 estimate to $185.8 billion in revenue and $47.20 per share in profit from a prior $192 billion and $50.22 per share.

In Craig’s opinion, the stock requires Street estimates to cool some more to the point where Apple can beat and raise on its reports once again. He sees the iPhone being hit by a wave of new smartphones this quarter, which, you’ll note, includes the Mobile World Congress event in Barcelona in late February:

With the iPhone 5 rolled out in 100+ countries and a deluge of new ARM Cortex A15 smartphones due in C1H13, we expect iPhone units to decline sequentially through C2Q13 and model 161mn units in C2013 (170mn prior).