The iPad decrease has been the subject of most of the attention Mr. Wu’s research note has garnered. The analyst told clients that he was lowering his forecast from 15 million iPads during the quarter down to 13.5 million units.
Behind the decrease are two main factors. The first is that he believes Amazon’s Kindle Fire is taking share away from the iPad. Amazon released the $199 Android-derivative tablet this quarter, and the device has gotten off to a roaring start. Some analysts believe that Amazon will sell as many as 5 million Kindle Fires during the quarter.
The second factor is the MacBook Air. Mr. Wu believes that some people who may have otherwise gotten an iPad this quarter have instead purchased a MacBook Air, which he described as being, “arguably the best ultra-mobile PC on the market.”
This is a reverse from what some analysts have worried about in the past, that iPad sales would cannibalize sales of Apple’s laptop line. It is also why he raised his Mac forecast from 5 million units to 5.2 million units for the quarter. Apple makes higher revenues and has better margins on its MacBook Air.
As part of his decreased forecast, he told The Mac Observer that his own sources in Apple’s supply chain in Asia have confirmed that Apple has lowered its orders for iPad components. That said, if Apple does sell 13.5 million iPads, it will still be a record quarter for the company, but some analysts had been expecting Apple to sell more of the devices.
He raised his iPhone forecast from 26 million units to 28 million—either number will set a new record. This brings Mr. Wu in line with analysts like Maynard Um of UBS, who is also modeling for 28 million iPhones.
“iPhone momentum is being driven by the company’s new flagship 4S as well as lower price points on its iPhone 4 and 3GS,” the analyst wrote. “This is helping drive greater smart phone adoption as well as enabling share gains against Android and BlackBerry (as evidenced with both HTC and RIMM missing numbers).”
On the holistic level, Mr. Wu is now forecasting revenues of $37.7 billion for the quarter, up from $37.1 billion. Apple is guiding for just $37 billion, while Wall Street’s consensus is $37.9 billion. His EPS estimates are now at $10, flat, up from $9.52. Apple guided $9.30, and consensus stands at $9.73.
Mr. Wu maintained his $500 price target on AAPL, as well as his “Buy” rating.
Shares of AAPL moved lower on Wednesday, ending the day at $389.09, down $1.86 (-0.48%), on light volume of 10.9 million shares trading hands.
*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.