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Apple's iPhone 5c margins, ASP expected to push AAPL previous estimates

Source: Morgan Stanley

A new report from Morgan Stanley suggests that the iPhone 5c's better-than-anticipated margins and popularity will propel Apple past previous analyst expectations.

The report from Morgan Stanley analyst Katy Huberty adjusts Apple's expected earnings per share for the fourth quarter of 2013 upward from $7.51 to $8.00, while holding the line on the stock's 'Overweight' rating and $540.00 price target. Huberty cites higher-than-anticipated margins from the iPhone 5c, which are in turn expected to drive average sale prices for the handset from $565 to $572.

Previous estimates were predicated on the idea that Cupertino would accept tighter gross margins in order to lower the cost of the then-unannounced iPhone 5c in a bid for marketshare in developing nations like Indonesia and Brazil. Apple instead chose to position the iPhone 5c at the upper-mid level of the smartphone market, which Huberty commented on in her post-introduction note to investors on Sept. 11.

"iPhone 5c priced higher than expected," she wrote at the time, "which may limit unit upside but alleviates margin concerns and puts upward pressure on ASPs."

In her latest report, Huberty also estimates that around 3 million of the 9 million iPhones Apple sold over the weekend were iPhone 5s units, with 4 million iPhone 5c units moved. The remainder are believed to represent 1 to 2 weeks of channel inventory for Apple's retail partners.

Huberty is not alone in predicting increased earnings for Apple — several analysts reacted positively to the company's opening weekend iPhones sales announcement, while Apple revised their own guidance upward on Monday.