Apple: Color on qtr * Baird upgraded AAPL to Outperform from Neutral and raised its tgt to $620 from $525. Firm had been concerned with the current product cycle, but with better-than-expected results now behind us, firm expects the focus to turn to 2014, which it believes holds more promise. Potential catalysts include a bigger screen iPhone, Apple TV, possible wearable devices and a likely China Mobile (CHL) launch. Additionally, firm also believes gross margins should hold steady in C2014 based on the current product lineup.
* FBR notes, in F4Q13, AAPL posted a solid quarter. Revenue was $37.5B, above its/consensus $36.9B est, driving EPS to $8.26, above its estimate of $8.03 and well above the Street $7.91 est. Stronger-than-expected iPhone units of 33.8M, above the consensus forecast of 32.0M but below FBR's 34.6M ests, drove iPhone sales of $19.5B, well above the consensus $15.6B target. iPad unit sales of 14.1M continued to be weak for the second quarter (flat YOY and down 4% sequentially), below the consensus estimate of 14.5M. On the call, investors reacted negatively as management guided for December quarter GMs below the de-risked consensus 37.8% estimate. As management explained the mechanics behind deferred revenue accounting associated with free OS and iWork, investors began to come back to shares, leaving the stock nearly flat by then end of the call.
* RBC notes AAPL reported a strong Sept-qtr and guided Dec-qtr revenues ahead of expectations. The one (perceived) negative was Dec-qtr gross-margin of 36.5-37.5%, RBC notes that reflects 160bps headwind due to deferrals. Fundamentally, RBC believes AAPL is executing impressively and sees more catalysts: i. CHL deal, ii. iPad/iPad mini launches, iii. potential increase capital allocation. Tgt to $590 from $550.
* Mizuho notes Apple's results were slightly ahead of consensus with iPhone shipments coming in ~2mm higher than expectations while iPad units were slightly below. Co's profitability was above expectations. For guidance, management's outlook calls for a strong sequential uptick in iPhone and iPad sales. Firm expects the stock to continue performing in early 2014 due to ongoing product cycle, launch of iPhone 6, introduction of a new product category and likely expansion of cash allocation policy. Tgt to $575 from $550.
* Cowen notes, from here, it believes 2014 seems to set up as a vastly different year than '13 with stronger iPhone units, a long awaited iPad upgrade cycle and multiple new product categories. Tgt to $590 from $550. ISI notes believe strong iPhone/iPad refresh cycles along with a 5" iPhone next year can drive a return to double digit EPS growth. ISI is moving its CY13 estimate to $174.1bil/$39.96 (down (9)% y/y) based on ~5.7% sales growth driven by 156.5mil iPhones and 73.2mil iPads, 37.2% gross margins (down ~470bps y/y) and 28.1% operating margins (down ~540bps y/y). Firm's CY14 EPS estimate of $190.0bil/$45.00 assumes ~9% y/y sales growth driven by 184.0mil iPhones and 82.0mil iPads, 37.2% gross margins (flat y/y), 28.0% operating margins (down ~10bps y/y) and ~13% EPS growth.
* AAPL tgt to $600 from $508 at BMO and tgt to $600 from $545 at JPM following earnings.