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Apple's Earnings Estimates Are Cut ... Again (Update1)

(Updated to provide analyst comments on the iPhone 5S and iPhone 6 in the fifth paragraph.)

NEW YORK (TheStreet) -- Another day, another Apple (AAPL) cut. This time, Jefferies analyst Peter Misek lowered his estimates for Apple's second quarter, and the worries might not end there.

Due to weak Asian supply checks and sell-through checks, Misek slashed fiscal second-quarter earnings estimates, and believes the likelihood of Apple missing guidance (25% probability) for its third quarter is higher than normal, given the state of the company today. Misek reduced his numbers for the quarter ending in March, as he now sees Apple earning $9.52 a share on $41.34 billion in revenue, down from $10.04 a share and $42.69 billion in sales. The Wall Street consensus from Thomson Reuters calls for earnings of $10.21 a share on $42.89 billion in sales.

Misek cut his price target to $420 from $500 but maintained his "hold" rating.

The analyst took down iPhone estimates for this quarter, moving to 35 million units from 37.5 million, and also noted the chance for a guidance miss due to slowing sales in the second half of March after Samsung launches its Galaxy S IV later this week.

In the note, Misek mentioned that the upcoming iPhone 5S and iPhone 6 could have some new features that may warrant attention. Most notably, Apple may move up the launch of the iPhone 6 to stop the bleeding. "The phones could have fingerprint technology, and we believe Apple is trying to move the iPhone 6 launch to CQ1 to stop the hemorrhaging to phablets, but historically when handset makers fall out of favor (e.g., the RAZR, BBRY, HTC) they fall faster/further than expected," he wrote.

Apple's supply chain appears to be having problems, and that is part of the reason for the reduction in estimates. "Our checks indicate Apple's suppliers are having problems with the new casing colors, leading to a push out from June to July-Sept. after Apple hoped to pull forward the update," Misek wrote in his note.

Is Apple Capitulating?

Jefferies' reduction follows those of Credit Suisse, Barclays Capital and Citi in recent weeks, as fears of competition and waning demand take hold.

Misek's cut to third-quarter guidance shows just how bearish Wall Street is on Apple. He lowered estimates drastically, predicting Apple will earn $7.22 a share on $35.48 billion in revenue. He previously expected Apple to earn $8.70 a share on $40.15 billion in sales. Wall Street analysts currently expect earnings of $9.59 a share on $40.4 billion in sales.

He also noted that he took iTV earnings out of his estimates, as he expected a September or October launch, noting he believes the television set has been pushed into next year. "We had thought that Apple's software and ecosystem would be enough to drive demand but our checks indicate that Apple wants the hardware to also stand out," Misek wrote.


One bit of upside for Apple is the rumored iWatch. Much speculation has been made about an Apple-branded smartwatch. There is increasing likelihood that Apple delivers the new product sometime later this year, Misek noted, putting the odds at better than 50%.

Shares of Apple fell in Tuesday trading, closing down 2.2% to finish at $428.43.

-- Written by Chris Ciaccia in New York

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