“This is likely the point where investors have finally made their peace with Apple smartphone margins coming down sharply over the next 12 months – while the volumes disappoint simultaneously,” Tero Kuittinen writes for Forbes. “As AAPL breaks to $411, several nightmare scenarios have been priced in. Wall Street expectations for spring quarter iPhone volume have been drifting below 30 M for months. After a rash of recent negative brokerage notes, the number is now probably at 27 M and moving lower.”
“Even as Wall Street has come to grip with a notably weak iPhone volume performance for this spring, margin expectations have also hit a new bottom,” Kuittinen writes. “Over the past couple of weeks, investors have been witnessing a steady stream of news about major price cuts and aggressive promotional campaigns in emerging markets like Brazil and India.”
Kuittinen writes, “Many brokerage firms that loved Apple one year ago are now capitulating in terror of being too bullish just before Apple issues spring guidance. The naked fear of former Apple bulls is exactly what we need just before the earnings come out. This is a real train wreck from the sentiment angle – and that looks like a great set-up for the Apple report on April 23. We face a rare situation where both volume and margin expectations of several product categories have come down substantially. Apple only needs to deliver one positive surprise – such as iPad volume for March quarter or revenue guidance for spring – and we are likely to see a robust rebound after the quarterly report.”
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