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Morgan Stanley: New iPhone makes AAPL a second half 2012 top pick

In a research note sent to investors on Tuesday, Morgan Stanley called the upcoming launch of Apple's much-rumored next-generation iPhone "one of the most significant product cycles in two years," and expects the device to lead a strong fourth quarter performance.

Analyst Katy Huberty tempers her optimistic fourth quarter forecast by noting potential iPhone and Mac shipments may be close to the firm's below-consensus estimates for the upcoming June quarter which stand at 27 million units and 4.1 million units, respectively.

For the near term, Apple is estimated to bring in $35.1 billion on gross margins of 43.1 percent for the second calendar quarter to end the period with an EPS of $9.45. The analyst disagrees with consensus for iPhone and Mac shipments and said the estimates don't reflect "shipment seasonality" ahead of expected product refreshes.

Data from Apple's earnings guidance and 10-Q disclosures of $13 billion in March quarter commitments suggest a $39 billion revenue for the June quarter, only four percent above consensus.

As for the firm's earnings per share forecast, Huberty estimates a one point iPhone gross margin boost due to decreases in component cost and a two point decline in iPad GM as Apple dropped the price of its entry-level iPad 2 model. The overall upside GM could take EPS above $10 which is closer to the $10.38 consensus and represents a 3.5 point gain on Apple's guidance from last quarter.

Apple gave June quarter guidance of $34 billion in revenue and $8.68 in EPS during its last earnings call in April. Since 2008, Apple has given second calendar quarter guidance two and ten percent below revenue and EPS consensus on average.

iPhone shipments for the second calendar quarter are expected to hit 27 million units based on supply chain checks and channel inventory checks. In the first quarter, AT&T, Verizon and Sprint accounted for 24 percent of all iPhone shipments and assuming the share remains consistent into quarter two, the three carriers will need to ship 6.5 million units to meet the expected 27 million global unit shipments.

On the Mac front, Huberty estimates 4.1 million shipments for the second quarter based on IDC and Gartner data released last week.

Looking forward the analyst expects conservative guidance for the third calendar quarter with shipments of 26 million iPhones, 17 million iPads, 5.3 million Macs and 5.4 million iPods. The drop in iPhone estimates takes into account a better consumer understanding of Apple's yearly product cycles. Any new products announced during the quarter, such as a new iPhone or iPad mini, are not expected to significantly affect earnings.

As for the fourth quarter, Huberty sees revenue of $60.9 billion and an $18.48 EPS estimate, which is respectively 12 and 19 percent higher than consensus. Driving the high earnings for the holiday season are 50 million iPhones and 25 million iPads.

Morgan Stanley gives AAPL an overweight rating with a $738 price target.

Apple will reveal the results of its third fiscal quarter during the company's quarterly earnings conference call July 24.