Analyst warns of stock volatility around Apple earnings

After surging for the past several weeks, shares of iPhone maker Apple Inc. could experience some short-term volatility around the company's fiscal third quarter earnings report this Wednesday, warns one Wall Street analyst.

"We believe buy-side investors have more or less figured over the past 18 months that Apple sell-side estimates tend to be overzealous and sometimes outright irrational," American Technology Research analyst Shaw Wu wrote in note to clients Monday. "Regardless, we advise investors to take advantage should Apple shares pull back on short-term concerns."

Like many fellow analysts, Wu expects the Cupertino-based company to report revenue and per-share earnings well above its guidance of $5.1 billion and $0.66. Specifically, he's modeling for earnings of $0.73 cents on sales of $5.3 billion, compared to Wall Street's consensus of $0.72 and $5.28 billion.

The analyst's model factors in a 24 percent rise in Macs sales to 1.64 million units and 22 percent rise in iPods to 9.7 million units with "little signs of cannibalization from iPhone."

"For iPhone, we anticipate a small contribution as only two days of sales were likely recognized in the quarter coupled with Apple's use of subscription accounting," he wrote. "We are modeling a conservative 250,000 units though we would like to note that this is at a much faster rate than Apple's previous big hit iPod nano, which sold 59,000 units per day."

Once again, the American Technology Research analyst is expecting Apple to model guidance conservatively for the current September quarter, likely citing its distributed iPhone accounting and the "lower margin" back-to-school season.

"We are modeling $5.8 billion and $0.77 versus consensus of $6.05 billion and $0.83," he told clients.

Wu reiterated his Buy rating on Apple shares with a $165 price target.

Since releasing the results of its second fiscal quarter in April, Apple shares have risen some 51 percent compared to just a 12.5 percent rise in the NASDAQ.