Analysts

Legend

Latest Headlines

November 5, 2008 - UBS

Although we continue to believe Apple will be able to grow at a premium to the overall market and increase share gains going forward, we do not believe the company will be immune to the broader economic slowdown, which we believe is reflected in our 11% Mac unit growth expectation."

Regarding a possibility that iPhone unit build orders may fall from 9 million in the prior quarter to 6.7 - 7.3 million:

Recent supply chain cuts have proven accurate (at least directionally). Hence, we believe recent data points may suggest unit volumes weaker than our current estimate of 5 million [for the current quarter]."

Regarding Apple's "Selling, General & Administrative" expenses of $20 per handset:

We find it surprising that Apple is able to achieve this level of cost discipline at such an early stage in the iPhone lifecycle (RIMM and PALM experienced materially higher SG&A costs early in their product cycles of $25-$40 per handset)."

If Apple were inclined to further penetrate the high-end enterprise market in the future, SG&A would likely rise:

...due to the 24/7 support requirements that most large enterprises require."

Regarding an iPhone price cut in the near future:

Operators may not necessarily pass on the cost-savings given already aggressive subsidies and pricing."

Um maintains a price target of $115 and a Neutral rating on AAPL.

October 22, 2008

RBC Capital Markets' Mike Abramsky lowers AAPL price target to $125 (from $140):

Despite valuation having corrected to 18x FTM P/E and strong fundamentals (compelling products, iPhone upside, PC Share gains), Apple's challenges and thus risks to valuation (disappointing guidance, lower visibility, declining GMs, possible decelerating Mac/iPod growth) have increased, and we see valuation remaining rangebound and volatile pending improving investor visibility to growth and margin trends.

Ahead of the crucial holiday season, Apple’s Q1 guidance, at $1.06-1.35 EPS and $9-10B revenue came well below typically conservative guidance (10% miss vs. 3% avg) and street ($1.67, $10.7B), on 30-31% GMs (vs. 33% street), affirming slowing momentum and margin risks amidst the uncertain environment. Management acknowledged reduced visibility and forecasting challenges; this is the first time Apple provided a revenue range in almost 2 years (last time was Q2/F07), suggesting unprecedented uncertainty of outlook."

Barclays Capital's Ben Reitzes lowers AAPL price target to $125 (from $135):

All-in-all, we believe the 4Q08 report will provide much needed relief for shareholders at least short-term for 4 key reasons: 1) sentiment was the most negative we’ve ever seen for Apple shares into any report, 2) while Macs and iPods were light, iPhone exceeded expectations significantly, causing cash flow to surge, 3) we believe investors will view the weak December quarter EPS guidance as conservative given the 30-31% gross margin outlook is hard to get to given component price trends and a mix shift toward iPhones. We believe the significant guide down for the December quarter was already widely expected. We note that Steve Jobs’ presence on the call also likely soothed investors and showed how he is on top of day-to-day issues and personally looking after shareholder money.

Despite a solid quarter, we want to take this opportunity to lower our estimates for Apple given checks continue to point toward risks around weakening economy. Checks detect more conservative build plans and it is unclear how electronics sales will hold up this holiday season looking at several indicators. As a result, we are lowering our unit estimates across the board, but raising our cash flow figures modestly to reflect higher than expected iPhone ASP’s (was $525 now over $600) and a strong cash conversion cycle. Weighing these factors, we estimate fiscal 1Q EPS of $1.35 (was $1.60), now based on flat year-over-year revenue growth to $9.6 billion (was $10.3 billion) and gross margin of 31.5% (was 32.9%)."

Piper Jaffray's Gene Munster maintains $250 price target:

During the Sept. quarter, iPhone sales of 6.9m were significantly ahead of the Street at 5.0m, iPod sales were in-line, and Mac sales of 2.6m were slightly below expectations of 2.8m ahead of new portables in Oct. While the product cycles make it difficult to determine, we believe that Apple is weathering the economic storm better than expected. With new Macs at lower entry prices ($999), new iPods, and strong iPhone growth, we believe Apple is positioned to exceed Dec. quarter guidance.

Bottom Line. We remain buyers of AAPL. Based on comments from the conference call, we think the economy has only had a minimal impact on Apple's business, and believe Apple will exceed guidance for the December quarter. 2009 remains a wild card, but should get a boost from a family of iPhones not yet reflected in Street models."

UBS Investment Research's Maynard J. Um downgrades AAPL and lowers price target:

We are downgrading Apple to Neutral from Buy and lowering our price target to $115 from $125. Our downgrade is primarily based on two reasons: 1) macro uncertainty and the impact to consumer spending and 2) sustainability concerns over a surprisingly high iPhone ASP and margin.

With limited visibility and a lack of visible catalysts near-term, we believe it prudent to step to the sidelines at this time. We note that there should be downside support given the company’s $27/share in net cash (which investors will eventually want to see better returns on), but do not see any near-term upside in light of uncertainty. Although our adjusted pro forma EPS (what we previously referred to as “peer-adjusted” EPS) reflects 18.8% growth year over year, we believe the potential macro risk warrants a discount to growth."

Needham and Co.'s Charles Wolf maintains Strong Buy rating and $240 price target:

The observers arguing for Mac price cuts point out that during a recession, users who might otherwise buy a Mac, may opt for an entry level Windows notebook instead. However, this argues against price cuts even more strongly because it implies that the price elasticity of demand between Macs and Windows PCs is lower and the value destruction is greater than we assumed in our analysis.

In short, Apple has demonstrated that there are a significant percentage of Windows users who recognize the value of a Mac and are willing to pay more for comparable configurations of Macs and Windows PCs. This argues that Apple should focus its resources on making the Mac even more unique as it did with the recent introduction of the MacBook, which features an all-in-one design and a versatile, multi-function track pad that no Windows competitor will be able to emulate for the foreseeable future.

And as usual, fourth quarter earnings guidance was downbeat, anticipating the recession. However, the astonishing news coming out of the release was non-GAAP earnings, which treats the iPhone on a sales rather than amortization basis. On this metric, Apple earned $2.69 in the quarter. We’re maintaining our strong buy rating and our price target of $240. We’re reducing our fiscal 2009 GAAP earnings estimate from $5.95 to $5.65.

The overriding risk in the Apple story is the economy. If the impending recession is deeper or more prolonged than we anticipate, Apple’s revenues and earnings could fail to meet out estimates."

Top of page  | RSS feed