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Apple Estimates Cut on iPhone, iPad Concerns (Update 2)

Stocks in this article: AAPL CHL DCM

iPad estimates were cut for the March quarter, "to account for weakness in larger iPads and seasonality." Reitzes now expects 18 million units will be sold, down from 19 million. He expects demand will pick up in the third quarter, with 19 million units sold and 84.9 million units being sold for fiscal 2013.

As a result of the iPhone and iPad unit cuts, Reitzes cut his second-quarter earnings estimates to $9.80 a share from $10.01, and slashed his revenue target to $41.63 billion from $42.53 billion. Fiscal third-quarter estimates were taken down to $9.04 a share from $9.84, with sales cut to $38.92 billion from $42.02 billion. For fiscal 2013, Reitzes now expects earnings of $43.75 a share on $181.49 billion in sales, down from $44.56 a share and $184.66 billion, respectively.

Reitzes notes that while he believes Apple could introduce a lower-cost iPhone 5 and iPhone 5S in the middle of this year, as recent rumors suggest, the more important additions come from improvements to iOS and services, such as Maps, to help create value in payments and television integration. "Long term, we believe that Apple's ecosystem is solid -- and has room to grow in both existing and new devices," he wrote, in his report.

Even though earnings estimates were cut, Reitzes sees room for upside in Apple, particularly as the company announces a new iPad mini with Retina Display, to go along with the current model. "We believe that these products can still drive a rebound in shares -- which is likely more pronounced after the April earnings report."

Ironfire Capital managing partner and RealMoney contributor Eric Jackson believes Apple has sped up its product cycle, moving from one year to six months. "I'm expecting a 5S before end of June and a 6 for the Fall. I think Apple's moved to a 6 month turnaround cycle," Jackson said in an email with TheStreet. He also said he expected new iPads in the Spring timeframe. Jackson is long Apple shares.

Shares of Apple fell 1.05% to $426.60 in mid-Wednesday trading.

-- Written by Chris Ciaccia in New York

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