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Apple’s record Q3: What the analysts are saying

With Apple beating some of Wall Street’s expectations (earnings, profit margins, Mac, iPod and iTunes) and missing on others (revenues, iPhones and iPads), there was no simple takeaway from the company’s Q3 2014 results.

Many analysts simply waved them off and turned their attention to the rumors of fall product releases.

Below: Excerpts from the notes we’ve seen.

Ittai Kidron, Oppenheimer: Solid Quarter Ahead Of The Refresh. “Apple delivered a solid June quarter with better than expected margins driving EPS upside. iPhone sales were encouraging given the normal mid-year demand lull and they again helped offset sluggish iPad sales (which weighed somewhat on the top- line). Other positives include strong traction in BRIC countries, margins (favorable mix/commodity prices) holding up despite the BRIC expansion/competition, strong cash flow and buyback activity. Overall a steady quarter/guide ahead of what we expect will be a strong iPhone upgrade cycle in the fall.” Perform. Price target: NA.

Bill Choi, Janney: A Mixed Bag of Apples as We Wait for New Products. “Rumored new products, including the iWatch and iPhone 6, were not directly addressed on the call. These new products should help improve the current anemic growth rates in developed markets. Management did indicate that the wider than normal revenue guidance range was due to Apple’s many moving pieces, suggesting the possibility of a September availability of a new product or two. It also likely accounts for the uncertain timing of the Beats deal.” Buy. Fair value: $94.

Rob Chira, Evercore: Growth on track to re-accelerate. “Even pushing the law of large numbers, we continue to forecast Apple’s revs RE-ACCELERATING to +11%Y/Y in FY15, with growth driven >2/3 by 1) larger-screen iPhone 6 cycle and >1/4 by 2) new iWatch/iBand, rounded out by 3) ongoing App Store growth while potential for 4) iPad cycling remains a wildcard… We believe Apple’s brand is, if anything, under-valued, and that the co. can continue to effectively create its own growth through uniquely innovative hardware+software engineering with integrated services vs. a sea of otherwise commodity devices. Overweight. $115.

Anil Doradla, William Blair: It’s All About New Product Cycles—Waiting for Tim to Cook Up Some Magic. “Overall, we viewed the June-quarter results as being impressive (especially with the backdrop of muted results from competitors). On the September guidance front, while we would have normally viewed the reset with a degree of caution, we anticipate the company’s launch of a new product (or products) will keep investor interest high. We view management’s guidance as being conservative and depending on the timing of new products, we expect our and Street estimates to be revised upwards. At $94.15 in the after-market hours, Apple trades at 14 times our fiscal 2015 estimate, or 11 times excluding net cash and investments. With stable gross margin outlook and continued share repurchases ($5 billion this quarter), we believe Apple is ripe for upward revisions to estimates over the next couple of quarters.” Outperform.

Gene Munster, Piper Jaffray: All Clear To Fall New Products. “We continue to be positive on shares of AAPL as we have passed Jun-14 with positive upside in the quarter to gross margins, which we view as a sign that profitability trends will improve as we work through a product cycle transition. While the company’s Sep-14 guide was slightly below our expectations, we believe this means that the iPhone will launch at the end of September vs closer to the middle as we previously expected… Our belief that Apple will launch a TV this year is waning.” Overweight. $105.

Katy Huberty, Morgan Stanley: Gross Margin Guide Dilutes Bear Case. “June trends were in-line with late product cycle quarters but importantly guidance was better than expected and gross margin risk is now off the table. We continue to like the set-up with top shareholders underexposed heading into the iPhone + iWatch product cycle… Despite iPhone mix decreasing 430bps Q/Q, gross margin increased 10bps and beat the top-end of guidance by 140bps. We believe this is a function of lower warranty expense (sustainable) and favorable component costs (sustainable perhaps with the exception of NAND price stabilization in September). We also expect higher margin iPhone, iWatch, and App Store to grow faster than the rest of the business in C2H14 and CY15, providing incremental margin tailwind. Overweight. $110.

Brian Marshall, ISI: Just Waiting for the “Mother Lode” of all Upgrade Cycles to Occur… “We know of few technology companies that can afford to be ~2 years behind the market on key trends (e.g., move to large ~5” display iPhones) and still be relevant in the market, especially when it comes to consumer electronics. In our view, it’s hard to overstate the value of AAPL’s ecosystem assets (e.g., iTunes, iCloud, App Store, etc.)… Importantly, we believe the power of these assets is about to be unlocked when AAPL releases a large-display iPhone later this quarter. In our view, this is likely to both entice Android users back to the iPhone and drive massive upgrades in the installed base.” Buy. $105.

Walter Piecyk, BTIG: Apple’s R&D Hits Levels Not Seen Since The Year Before The iPhone’s Initial Launch. “Apple’s quarter was largely uneventful, which should be welcomed by investors awaiting the new product launches promised for later this year. While the FQ4 revenue and gross margin guidance didn’t seem to imply any big product launches until late in the September quarter at the earliest, the ramp of R&D expense is a good indicator that Apple is working diligently on something new. R&D investment topped 4% of revenue, a level it has not reached since 2006, in the quarters before the first iPhone launch. In absolute terms, Apple is investing $420 million more per quarter than it was just a year ago. $112.

Brian White, Cantor Fitzgerald: Solid Execution in 3Q, but All Eyes on the “Fab Fall” Launch. “In our view, Apple executed very well during what is typically a seasonally soft June quarter and provided a good enough 4Q:FY14 (ending September) outlook; however, we believe investors are more focused on the “Fab Fall” launch (e.g., iPhone 6, “iWatch”, etc.), the ramp with China Mobile, and the company’s broader push into the enterprise market with IBM.” Buy. Raising price target to $123 from $111.

Amit Daryanani, RBC: Beats EPS, Soft on Sales. “The Company reported Jun-qtr results of $37.4B/$1.28, revenues came in modestly below expectations while EPS was ahead of consensus driven by impressive gross-margins (street was at $37.99B/$1.23), gross-margins came in at 39.4%, which was nearly 200bps ahead of RBC/street expectations of 37.5% (their guide was for 37-38%). Sept-qtr guide of $37-40B in sales is below street expectations but likely indicative of an upcoming airpocket ahead of the material iPhone6 product cycle, AAPL. Outperform. $100.

Shelby Seyrafi, FBN: Strong Mac, still strong iPhone sales more than counter weak iPad sales. “Although we are disappointed by the weak iPad sales (units down 9% Y/Y as reported and down 10% Y/Y on a sell-out basis; revenue declined by 8% Y/Y), we are encouraged by still-strong iPhone sales (units up 13% Y/Y as reported and up 11% Y/Y on a sell-out basis; revenue up 9% Y/Y) in front of the iPhone 6 cycle (which we think starts in mid-Sept). Moreover, Mac sales were strong with units up 18% Y/Y and revenue up 13% Y/Y as MacBook Air sales were strong.” Outperform. Raising price target to $110 from $93.

That’s most of them.

Follow Philip Elmer-DeWitt on Twitter at @philiped. Read his Apple (AAPL) coverage at or subscribe via his RSS feed.