Barclays downgrades rating on Apple stock due to maturing smartphone market, tells investors to 'ste
Shares of Apple stock slid Thursday morning after investment firm Barclays Capital lowered its rating on shares of the iPhone maker, saying it doesn't expect the stock to break out of its current trading range within the next year, and suggesting its performance could become comparable to that of rival Microsoft.
Analyst Ben A. Reitzes issued a note to investors, provided to AppleInsider, in which he advised them to "step aside," citing a maturing smartphone market that he believes presents limited future growth potential for Apple's iPhone. And without a new "revolutionary" product, he doesn't believe shares of Apple will see a boost anytime soon.
"Frankly, we just couldn't quite bring ourselves to use smart watches or TVs as reasons to raise numbers -- nor were we fully convinced that these products could move the needle like new categories did in the old days," Reitzes wrote on Thursday.
The analyst said that as an iPhone user, he's "very excited" about some of the company's new products in the pipeline, with potential innovations in mobile payments, geolocation, and wearable devices. But as an investor, he doesn't see Apple introducing anything as groundbreaking from a financial perspective as the iPhone or iPad.
"We believe Apple's story is all about iPhones and 'new categories' seem to be designed to make the iPhone more useful --?but don't necessarily reaccelerate growth in the iPhone category to sustainable double-digit levels," he wrote. "If we were to see evidence that payments and/or new content deals enhance the Web services aspect of Apple vs. Google and others long-term, we may need to reassess this opinion."
Reitzes then went on to cite the valuation of Apple's rival Microsoft from 2000 to 2010, and suggested that Apple might see a similar pattern. The analyst said that he sees "no precedent" that large tech companies can broadly outperform once again after "a tough year or two."
In his eyes, the "law of large numbers" may have caught up with Apple, and the company's gross margins may have peaked.
"As a result, there doesn't seem to be anything wrong with saying shares could be range-bound as we move from product cycle to product cycle until we can see Apple creating entirely new markets in the cloud," he said.
Accordingly, Barclays has downgraded Apple from an "overweight" rating to "equal weight," with a continued "neutral" outlook for the company. The firm's price target for shares of AAPL is $570, or about $35 higher than where it is trading as of Thursday morning.
Analyst Ben A. Reitzes issued a note to investors, provided to AppleInsider, in which he advised them to "step aside," citing a maturing smartphone market that he believes presents limited future growth potential for Apple's iPhone. And without a new "revolutionary" product, he doesn't believe shares of Apple will see a boost anytime soon.
"Frankly, we just couldn't quite bring ourselves to use smart watches or TVs as reasons to raise numbers -- nor were we fully convinced that these products could move the needle like new categories did in the old days," Reitzes wrote on Thursday.
The analyst said that as an iPhone user, he's "very excited" about some of the company's new products in the pipeline, with potential innovations in mobile payments, geolocation, and wearable devices. But as an investor, he doesn't see Apple introducing anything as groundbreaking from a financial perspective as the iPhone or iPad.
"We believe Apple's story is all about iPhones and 'new categories' seem to be designed to make the iPhone more useful --?but don't necessarily reaccelerate growth in the iPhone category to sustainable double-digit levels," he wrote. "If we were to see evidence that payments and/or new content deals enhance the Web services aspect of Apple vs. Google and others long-term, we may need to reassess this opinion."
Reitzes then went on to cite the valuation of Apple's rival Microsoft from 2000 to 2010, and suggested that Apple might see a similar pattern. The analyst said that he sees "no precedent" that large tech companies can broadly outperform once again after "a tough year or two."
In his eyes, the "law of large numbers" may have caught up with Apple, and the company's gross margins may have peaked.
"As a result, there doesn't seem to be anything wrong with saying shares could be range-bound as we move from product cycle to product cycle until we can see Apple creating entirely new markets in the cloud," he said.
Accordingly, Barclays has downgraded Apple from an "overweight" rating to "equal weight," with a continued "neutral" outlook for the company. The firm's price target for shares of AAPL is $570, or about $35 higher than where it is trading as of Thursday morning.
Comments
yes coming from the company which paid big fines for being caught manipulating interest rates so they can rip off consumers.
I think Apple knew this. Anticipated it. I would think there are other plans and will be revealed in 2014 or 15. We will see.
We put too much weight on what Wall Street says as a whole.
Yet another anal-y-sis
I think there is something that report overlooked, the actual hardware account for a fraction of Apple revenu. Apple is makings a lot more money selling digital media and apps than selling iOS or Mac hardware.
Meh. They just issue another press release.
Reading other articles mentioning this and the WhatsApp acquisition came up. Facebook is a one trick pony, Google is as well (only really sells ads, the rest doesn't make them any money), Microsoft is done so why do all these idiot investment firms only see Apple in the same light? They have a lot more than just the iPhone and all of the other areas make money. What happens when people don't want to use Facebook anymore? Will Barclays downgrade them? Probably not.
@starbird73 "We put too much weight on what Wall Street says as a whole." You are absolutely correct and I'm past being tired of all the garbage these worthless people spew out of their uneducated mouths.
Additional stock buyback in 3... 2... 1...
Apologies to Tennessee Ernie Ford
Been reading this board for several years but first time post. Yeah, I am a share holder. I have to laugh to the responses here when investment firms downgrade APPL, Face it folks, until Apple develops new products the stock is range bound. I think we have been fortunate it has stayed above $500. Apple is a growth company and until there are signs of growth, no buy back, dividend increase, etc., is going to really move the valuation or the stock price. Its the way of the market. I own a few shares of Tesla, unfortunately not enough, and it announced it is going to sell an additional 3-5,000 cars next year and the stock price doubled. makes no sense, but that is the way it is....
Well even if Apple's business stays at zero growth, they could still buy back half of their remaining shares in 5 - 10 years, depending on repatriation tax implications or issuing debt. If you assume their P/E stays the same (and there really isn't any room for it to go lower) then that would result in a doubling of the share price for that reason alone. Now before anyone starts pointing out that buybacks didn't work out so well for company X, please note that all such companies began with large P/Es that needed to come down to match their level of low - or no - growth.
Thompson
He's just trying to manipulate the market so he can buy up shares at lower prices. Then he will pump up the market and dump apple like a two-bit hooker. It is simple to do with a company like Apple.
He should go to jail.
We put too much weight on what Wall Street says as a whole.
It's more fundamental than that: the entire concept of the stock market is based on investing in something with huge growth potential. There's no value placed on a stable, successful company with huge profits (at least, not anymore). All of the value is placed on growth potential.
Which is great for startups, but not so great for established companies like Apple. So I think it makes sense for them to just buy back the vast majority of the stock and avoid the distraction of voices which have no real vision which is relevant to the current reality of Apple.
Agreed!