UBS is the latest in a long line of me-too firms to trim its outlook on Apple (AAPL) as investor sentiment continues to sour. In a note to clients picked up by Forbes on Tuesday, UBS analyst Steve Milunovich cut his estimates for fiscal 2013 and 2014 after a survey from Consumer Intelligence Research Partners found that consumers are opting for cheaper iPhone models (iPhone 4S and iPhone 4) and iPhone 5 handsets with less storage. If the survey is accurate, both scenarios obviously could have big implications for Apple’s margins.
Milunovich now sees Apple’s earnings coming in at $44.68 per share in fiscal 2013, down from $47, and $52.80 per share in fiscal 2014, down from his earlier estimate of $55.85. UBS cut its price target on Apple shares to $650 from $700 as a result.
The analyst highlights some interesting data from CIRP’s survey. First, demand for pricier current-generation iPhone models is seemingly falling. The average amount of storage in new iPhones 4S models sold through October last year was roughly 30GB. It fell to 20GB with the iPhone 5 according to the survey, meaning fewer customers are choosing the more expensive 32GB and 64GB models that carry bigger margins for Apple.
CIRP also found that demand for older models has increased to 50% of all iPhones sold since the iPhone 5 launched. In the iPhone 4S’s product cycle, older iPhone models accounted for just 33% of sales.
In response to increased demand for less expensive smartphone models, Apple is reportedly prepping a new entry-level iPhone that will debut this year.