Wall Street Low-Balls Apple, Gets iPhone and China Wrong

NEW YORK (TheStreet) -- Apple's(AAPL) gargantuansecond-quarter results took Wall Street by surprise, as analysts underestimated the company's booming business in China.

Deutsche Bank analyst Chris Whitmore, for example, had forecast Apple revenue of $33.7 billion and earnings of $9 a share. The tech giant posted sales of $39.2 billion and earnings of $12.30 a share.

Whitmore, like most of his peers, discounted iPhone sales, forecasting 26 million shipments, well below the reported 35.1 million.

The Deutsche Bank analyst, who has a "buy" rating on Apple, raised his price target from $600 to $650 in a note released today. Still, Whitmore warned of slowing iPhone growth ahead of a possible iPhone 5 launch in October.

Societe Generale analyst Andy Perkins also was among analysts low-balling Apple's numbers, predicting sales of $36.35 billion and earnings of $9.45 a share. Perkins expected 31 million iPhone shipments.

Daniel Ernst of Hudson Square Research was looking for revenue of $35.5 billion and earnings of $9.48 a share. The analyst, however, did expect upside to his prediction of 28 million iPhone sales.

JPMorgan analyst Mark Moskowitz was close to Apple's revenue number, predicting total sales of $39.1 billion in a note released in early April. The analyst's earnings estimate of $10.80 a share, however, was wide of the mark. Moskowitz expected 31.1 million iPhones.

China was clearly an unknown quantity for many analysts heading into Apple's second quarter, with the country a larger growth catalyst than anticipated.

Speaking during a conference call late Tuesday, Apple CEO Tim Cook said the company enjoyed an "incredible" three months in greater China, which includes Hong Kong. The Cupertino, Calif.-based firm brought in record China revenue of $7.9 billion, he said, a three-fold increase on the prior year's quarter.