Other Analysts who cover Apple
October 22, 2008
RBC Capital Markets analyst 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 analyst 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%)."
October 13, 2008
Bernstein Research analyst Tony Sacconaghi upgrades AAPL:
We are upgrading Apple to Outperform - while reducing our target price from $175 to $135. We believe that the stock is overly discounted, that Apple's short-term financials are likely to remain relatively healthy despite economic weakness, and that the company's longer term growth story remains intact. While short-term uncertainty persists, we believe that the stock's overall risk-reward is compelling at current levels.
Investors appear to be valuing Apple on an earnings multiple, rather than on cash flow, which fundamentally undervalues the company given the huge deferred revenue growth associated with the iPhone.
We feel confident that Apple will be a share gainer, as the company continues to expand distribution and purchase intention remains high. Perhaps most importantly, we expect Apple to lower price points to address a much broader market at some point over the next year.
Our analysis suggests that offering a notebook priced at $900 would expand Apple’s addressable notebook market by nearly 50% in revenue terms (and 67% in unit terms), while an $800 offering would increase Apple’s addressable revenue market by 69%.
Apple's cost structure has high variable costs, creating less earnings downside risk than many investors may realize. Given its extensive use of contract manufacturing, Apple's COGS (Cost of Goods Sold) are nearly entirely variable, and operating expenses relative to gross margins are low; the upshot is that Apple's earnings per share suffers less to a given revenue reduction than many of its peers. Buy-side expectations are considerably lower than consensus."
September 30, 2008
Citigroup analyst Rich Gardner on Apple earnings:
Our most recent checks suggest that the MacBook’s entry-level price is unlikely to fall below $1,000, with Apple opting for more features at $1,000 rather than a less fully featured product starting at a lower entry-level price.
It is important to note that we still expect growth in both revenue and EPS during FY09 despite slowing consumer spending. We believe this will represent outperformance versus most consumer PC, consumer electronics and handset competitors thanks to the superior design, ease-of-use, utility and reliability of Apple’s products.
iPhones shipped in FY08 will contribute $1.8B of incremental revenue in FY09, or 70% of the total revenue growth we now model for FY09."
September 15, 2008
Citigroup analyst Rich Gardner predicts a refresh of MacBook line coming:
Field checks confirm that shipments of new MacBooks have begun, with a sharp production ramp planned for September and an introduction planned for early October. The most distinctive features of the new MacBook appear to be a very thin aluminum casing, an LED-backlit display and an aggressive entry-level price point.
Supply chain checks in Asia suggest that Apple’s 3Q revenue is tracking in line with our above-consensus estimate of $8.3B thanks to surprisingly robust iPod shipments and in-line PC shipments."
September 11, 2008
JMP Securities analyst Samuel Wilson contends that AAPL at current levels "is not compelling":
Apple has done an exceptional job of gaining [Mac] market share over the last several years. Given the deteriorating macroeconomic environment, we believe it is unlikely that Apple will be able to match the 2007 feat in 2008.
Our concern with AAPL stock is that we believe there is little room for upside surprises. For the last 11 quarters management has given forward revenue guidance, Wall Street’s consensus has always been above that guidance, and for the most part the company has reported slightly above that consensus estimate.
With much of the world on the brink of or entering recession, it is just that much more difficult for Apple to put up high growth rates.
Because Apple has invested heavily in its own chain of retail stores, an overall economic slowdown or slowing demand for the company's products will not only affect sales growth but also impact profit margins due to the fixed-cost nature of the retail stores.
As iPods and other music sales become a greater percentage of sales, Apple may experience pressure on overall gross margins because those products carry a lower gross margin.
Samsung and LG have started to roll out iPhone 'clones' with touch screens, like the Samsung Instinct and LG Dare. While we believe these phones are not as good as the iPhone, we believe they have caused pricing issues."
August 14, 2008
Lehman Brothers analyst Ben Reitzes on a iPhone sales:
We believe our estimate of 3.8 million iPhones sold in Apple’s [September quarter] is very conservative. Furthermore, we believe that initial demand overseas is very strong and will get much stronger; we estimate at least 8.3 million iPhones could be sold in [the December quarter]."
August 5, 2008
Lehman Brothers analyst Ben Reitzes on a new iPhone form factor:
While we believe Apple is working on a lower-end iPhone form factor, we do not think one will come until Spring 2009. While we have picked up indications of a product like this in the supply chain, it doesn’t appear that the company has yet solidified the form factor, so it may be hard to get it finalized in time for the holidays.
We believe that strong demand in the initial countries could make a rollout overseas take longer simply based on supply. We believe that initial demand overseas could be quite strong and estimate 8.3 million iPhones could be sold [in the December quarter] with 24.2 million sold in fiscal 2009."
June 10, 2008
Citigroup analyst Rich Gardner raised his AAPL price target from $248 to $287 saying:
We remain aggressive buyers of Apple shares at current levels. Apple's decision to move from a revenue share model to a traditional subsidy model for the 3G iPhone is a significant positive because Apple receives iPhone-related cash flow sooner.
The biggest surprise was the speed with which Apple is abandoning the revenue sharing model in favor of a traditional subsidy model. AT&T obviously believes that the higher upfront investment will pay off in higher subscriber adds, higher average revenue per unit, and lower churn."
Lehman Brothers analyst Ben Reitzes maintains his Overweight rating on AAPL and raised the price target from $202 to $234:
We believe weakness in the stock initially was a combination of a 'sell on news' reaction and some concerns about the product shipping about 2 weeks later than we expected. Also, we believe there is some confusion about the altered iPhone business model. We would use weakness in shares to accumulate the stock given Apple is creating a top of the line mobile community with multiple revenue streams that we believe should benefit investors over the long-term.
We believe focusing on the minutiae around shared average revenue per unit streams (just like earlier this year) misses the big picture impact of the significant growth in iPhone units and the ripple effect on the rest of the company."
RBC Capital Markets analyst Mike Abramsky maintains his Outperform rating on AAPL with a target price of $220:
We estimate Apple needs to sell 60% more subsidized handsets vs. unsubsidized to offset the loss of service revenue, which we believe is more than achievable, given our prior estimate that $199 pricing can boost sales over 100%."
May 5, 2008
RBC Capital Markets' Mike Abramsky raised his price target on AAPL to $220 from $200, while maintaining an "outperform" call on the stock. He also raised the shipment forecast to 14 million units in 2008 (up 40% from his previous estmate of 10 million) and 24 million in 2009.
We see upside potential to iPhone estimates following changes, in our opinion, Apple may make to its iPhone business model, expected to accelerate momentum and expand its global addressable market. In our view, 3G remains on track for a global June launch, with subsequent carrier announcements, new pricing, and features showcasing 3G.
[Apple] may be planning to allow subsidized pricing, diminishing carrier exclusivity and supporting global unlocked iphone sales. Such a move could lift iPhone sales momentum by as much as 50% to 100%.
The high-value Smartphone consumer segment is early and growing, offering room for RIM, Apple and Microsoft, all of whom remain strong contenders, and whose offerings, pricing and positioning appeal to different users. Unlike the PC market, Apple faces no incumbent (like Microsoft), creating an opportunity for Apple to take share from existing voice handset vendors like Motorola."
April 25, 2008
Citigroup analyst Rich Gardner says the 3G iPhone will be announced on June 9 at WWDC and will be the "first of an impressive wave of new products."
We expect a complete refresh of the laptop and iPod lines. The SDK should yield hundreds of compelling iPhone/iPod touch third-party apps by Christmas."
April 22, 2008
Lehman Brothers analyst Ben Reitzes initiates coverage of AAPL with an Overweight rating and comments on the Apple's growth prospects:
While Apple is primarily a consumer play, we believe expansion into new markets and geographies should help offset weakness felt in the US economy.
Despite the economic environment, we do not believe that Apple’s momentum has waned in Macs; in fact, Macs may have reached a tipping point with share on its way toward doubling over the next 3-5 years. For kids and adults it is the cool thing to have. It's the right product at the right time.
We believe that Apple is the company best positioned in our coverage universe to take advantage of the content expansion theme—by far. We believe the content expansion trend drives obvious upgrade paths within the Apple eco-system with regard to iPhones, iPods, Macs and eventually Apple TV.
Not only does the content expansion help create a platform for revenue growth, but for margin expansion as well. Apple’s vertically integrated model has 'trapped' in the wallets of consumers better than any business model we have seen in years. For example, we estimate that Apple’s Mac units will grow about 33% this year and about 20% next vs. only about 10-12% growth for the global PC market.
We believe there is a market for a very small PC in the sub-$1,000 range optimized for media playing, internet surfing and even navigation. We had expected that Apple could get a product like this out this year but it seems that it could be next year.
We believe that this kind of device with high speed wireless connectivity could eventually account for over 10s of millions of units, adding further support to the notebook market. We believe Apple would be the big winner if this market were to develop.
We believe new iPhones could ship in July and would not be surprised to see Apple ink several new international partners in that time frame, including in China. Down the road in [the second half of] calendar 2009, we believe Apple is likely to introduce a new category of ultra-portable devices maximized for media-playback and internet surfing.
The [iPod] touch has a lot of potential because of the new movie rental service. People are going to start realizing that you can get a lot of great movies on (Apple's online music store) iTunes and take them on the train or plane or whatever.
Key areas to watch are iPod inventory levels and execution risk in Apple’s ability to launch new iPhones successfully in the US and international markets."
March 26, 2008
Gartner analyst Ken Dulaney speculates that Apple is building 10 million additional 3G iPhone units which will have an Organic Light Emitting Diode (OLED) display (thinner phone and lower power consumption).
Bob Hafner, Dulaney's boss, clarifies:
If Apple was to place an order, then 10 million would be a reasonable number. And we absolutely believe that in the next-generation iPhone, 3G will be there.
We have not got confirmation that an order had been placed."
March 4, 2008
Citigroup analyst Rich Gardner comments on the 3G iPhone:
Several sources confirmed the introduction of a new 3G iPhone during the second quarter. While iPhone and iPod units may disappoint again during the first quarter, we remain comfortable with our above-consensus EPS estimate thanks to solid PC momentum and sharp declines in DRAM and NAND pricing.
Several vendors, including HP and Acer, appear poised to introduce new low-priced notebook models in the second calendar quarter with retail prices as low as $300-$400."
March 3, 2008
RBC Capital analyst Mike Abramsky comments on the forthcoming 3G iPhone:
Apple is likely to offer a faster processor in the devices, along with more onboard memory, which will also increase speed, downloading/uploading rates and browsing experience, as well as enable higher video quality. The lower latency of 3G and faster processor/memory may likely allow deployment of new features, including video/voice capture, streaming HD video, real-time GPS location based services, etc."
February 11, 2008
Citigroup analyst Rich Gardner comments on iPhone and iPod production:
Several sell side analysts have recently cited cuts to March quarter build plans for both iPod and iPhone. We believe that these cuts did occur and that March quarter iPod and iPhone build plans are both below the current sell-side consensus.
While March quarter iPod and iPhone build plans are below sell-side consensus numbers, we believe that this is well understood and expected by the buy-side. At this point, we do not believe 10 million iPod revenue units and 1-1.5 million iPhone units during the March quarter would constitute a surprise to investors. In addition, we believe that iTunes movie rentals will provide an incentive for current iPod users to upgrade to a video-capable iPod as rental content on the site grows throughout the year.
While virtually 100% of the unit shortfall was in the low-end iPod Shuffle, allowing Apple to beat consensus iPod revenue despite the unit shortfall, the Street was rightfully concerned about the lack of unit growth. We believe the unit shortfall reflected the lack of a compelling update to the Shuffle product last Fall; the Shuffle simply was not the compelling 'stocking stuffer' this year that it was last year.
While iPhone shipments are likely to be weak during the March quarter, we believe this partly reflects channel inventory draw down ahead of the launch of a 3G iPhone within 1-1.5 quarters. The introduction of 3G along with price cuts and additional carrier relationships in Europe should give investors increased confidence in Apple’s stated target of 10 million iPhone unit shipments during calendar year 2008."
October 15, 2007
Lehman Brothers analyst Harry Blount reiterate his "overweight" rating on Apple and raises the target price from $160 to $190.
August 1, 2007
Citigroup analyst Rich Gardner comments on recent AAPL pullback:
We see worst-case near-term downside to $115 (20X FY08 free cash flow plus about $15 in net cash per share on the balance sheet, or 20X F12 free cash flow beginning 4FQ08), but view the probability of a pull back to these levels as low.
With upside to $160, we would increase positions at current levels and simply use any near-term weakness to buy more shares. AAPL shares declined 6.8% or almost $10 Tuesday following rumblings of iPod and iPhone production cuts in Asia. In our view, the Street should not be alarmed by these cuts.
iPod production cuts reflect normal channel inventory drawdown ahead of new product introductions in August or September. More specifically, we expect higher-capacity Shuffles and nanos with lower price/GB, as well as a video iPod with an iPhone-like 3.5 inch diagonal screen and touch-screen controls.
We note that our estimate and consensus was 3 million iPhone units for 2007 before Tuesday’s talk of a reduction in build plan from 7 to 8 million units to around 4 million units. In our view, lower price points, 3G, and broader geographic distribution will be required before Apple can hope to sell 7 to 8 million units in six months, so this was never a reasonable expectation."
Higher
capacity nanos and video iPod with touch screen controls announced on September
5.
Gardner says Mac sales will continue to hold strong throughout 2007:
First, Apple ended the June quarter with Mac channel inventory of three to four weeks, one to two weeks below the company’s target range. This clearly suggests imminent product transition(s) within the Mac line. Indeed, Apple announced Tuesday a 'Mac-related Press Event' at the company’s headquarters on Tuesday, August 7, which likely will yield newly-redesigned flat-panel iMacs and perhaps other new Mac-related products as well."
Redesigned
iMac announced on August 7.
July 31, 2007
RBC Capital analyst Mike Abramsky says Apple will be releasing an iPhone update patch soon:
Management expressed excitement at plans to increase iPhone value over time via new software features, citing 'the sky is the limit' for iPhone software.
According to Abramsky, the iPhone updates include: instant messaging, image sending, MMS and GPS support, but no MS Exchange support.
It appears to us that Apple, classically, has more pleasant surprises in store for iPhone fans and investors."
Abramsky also added that future iPhones will likely be differentiated not by software features, but by hardware (memory capacity) and price.
This affirms our view of a lower priced ($349-399) iPhone in 4Q 2007 or 1Q 2008, with a higher priced version at higher capacity, to expand its market opportunity.
Despite 3G's greater prevalence in Europe, 3G iPhones may not arrive until Spring 2008, given battery life and form factor challenges. Apple may promote Wi-Fi as its high-speed strategy for now, offsetting slower EDGE."
The
8GB iPhone price was reduced to $399 on September 5. The 4GB iPhone was discontinued
due to lack of interest. No new features were added to the iPhone.
July 12, 2007
RBC Capital analyst Mike Abramsky says Apple may plan to produce 8M iPhones in 2007, well ahead of Apple's publicly stated 18-month 10M goal.
Consistent with its iPod product cycles, Apple’s 2007 plans may include offering higher memory (e.g. 16GB) iPhones, while refreshing existing models at lower cost (possibly a refreshed 8GB version at $349 - $399) to expand demand.
From checks we estimate iPhone sell-through at 850- 950k to date (we est. 450-500k 1st weekend). Supply constraints caused stock-outs at most AT&T stores and some Apple stores, but most are replenishing this week, and checks indicate sustained demand."
Firm also expects 3G/HSDPA iPhone by Spring of 2008 with a higher resolution display:
The higher definition version could be compelling, able to replay content in near HD as well as splay resolution of digital cameras and video recorders. Additionally, given 480x720 is the lowest resolution Apple TV supports, this higher resolution iPhone may also offer some form of personal entertainment integration to Apple TV."
Checks also suggest Apple may be planning an iPod line refresh in Q4 2007, referring to an updated iPod Nano and new video iPod.
Some or all are of these iPods are expected to include larger displays, more memory and integrated wireless (Wi-Fi). The most significant update may be a new iPod Video, which could include iPhone-like features including widescreen, touchscreen, Wi-Fi, Mac OS X, and possibly larger flash memory capacity (16GB) or HDD (30/80GB)."
New
iPod touch announced on September 6 which has a widescreen touch display, Wi-Fi,
OS X, and 8 or 16 GB storage.
March 25, 2007
Jupiter Research analyst Michael Gartenberg on Leopard possibly being delayed until October:
"Just spoke with Apple who confirmed the reports are wrong and Leopard is still scheduled to ship in this spring as they previously announced. The rumor mill is wrong again."
Apple
announces that Leopard will in fact be delayed and is targeting an October release.
March 12, 2007
ThinkEquity Partners LLC analyst Jonathan Hoopes believes Leopard will:
...hit the market sometime in the next few weeks. With the Leopard launch just around the corner, we have revisited our Apple revenue and earnings power estimates in light of the ever-larger Mac OS X user base"
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