Wells Fargo Reiterates Outperform on Apple Following Earnings Report

In a report published Friday, Wells Fargo Securities analyst Maynard Um reiterated an Outperform rating on

. In the report, Wells Fargo Securities noted, “Warranty reversal in the June quarter –a 120-basis-point (bp) gross margin benefit, all else equal. Apple reversed some of its warranty over accruals in Q3, which provided a tailwind to gross margin by about 120 bps (normalizing for the 1x catch-up accrual related to prior quarters). While a number of factors go into calculating accruals, the reversal may be related, in part, to a deceleration in expected, which could be a function of mix to the better yielding iPhone 4. We would expect to see the cost of warranty claims to come down or for the accruals to come back up, which would likely be the base case scenario into a new product launch...We expect easier year over year compares, potential positive supply chain data into the next product cycle, and improving gross margin likelihood to help reaccelerate earnings and see the company as well-positioned to continue to take value share in its core smartphone, tablet, and PC markets.” Apple closed on Thursday at $438.80.