Apple's 1QFY2014 revs of $57.59bn were below GS est of $58.54bn and above cons of $57.46bn, while EPS of $14.50 topped our forecast of $14.29; cons of $14.09. iPhone shipments of 51.03mn missed our est of 56.67mn and cons of 54.60mn, but revs of $32.5bn were in line with our ests on much higher ASPs. Apple guided to 2QFY2014 revs of $42-$44bn, below GS forecast of $45.92bn and cons of $46.05bn.The disappointing guidance is likely to pressure the stock in the near-term, but we are maintaining our Buy rating for the following reasons:
1) Cash Flow remains solid and leaves room for substantial increases in capital allocation in coming months
2) The ramp of China Mobile is weighted toward the back half of the year, providing room for incremental iPhone growth
3) Apple's enterprise momentum should accelerate in 2014
4) Platform enhancements (mobile payments) are increasingly likely in 2014
5) We believe Apple could be more open to competing more aggressively in the midrange smartphone market.