Citigroup downgrades Apple despite market-wide bullish outlook
Fighting the current, Citigroup on Thursday lowered its rating on shares of Apple to "Hold" from "Buy," citing the rapid increase in the company's share price.
"To be clear, we have no issue with medium to long-term fundamentals for Apple," analyst Richard Gardner explained in a research report to clients. "Our modeling simply suggests that forthcoming products like iPhone are fairly reflected in consensus earnings per share."
Gardner said he continues to favor Apple?s long-term growth opportunity, but sees little more than market returns in the shares from their current levels.
"We would be buyers on a pull back to around $90 and believe that summer seasonality, less favorable component pricing and lack of news during the next several months may provide such an opportunity," he said.
Gardner's analysis arrives in stark contrast to a chorus of reports from over a half-dozen other Wall Street firms, each of which maintained a higher level of confidence in Apple's ability to drive it shares significantly higher.
Bear Stearns' Andrew Neff raised his price target to $143 per share from $130, citing Apple's shift "to a broader array of products with multiple drivers and a sense of what is down the road."
"We believe shares can continue to surge into calendar year end on the back of new products," commented UBS's Ben Reitzes, as he bumped his Apple price target by $9 to $133. "The thesis that Mac sales can surge is alive and well."
At ThinkEquity Partners, analyst Jonathan Hoopes reiterated his Buy rating on shares of the Cupertino-based iPod maker while increasing his target share price to $130 from $120. "The [company's] earnings upside clearly supports our 'Look at the Core' thesis," he said. "That is, Apple is a software company that manifests itself through hardware."
Things were little different over at Morgan Stanley -- if not more bullish -- where analyst Kathryn Huberty kept an 'Overweight' rating and $110 price target on Apple shares, but said she is growing more confident that the stock will reach $160 per share in the next year.
Other notable price target hikes came from Deutsche Bank, where analysts upped their mark to $140 from $130, and PiperJaffray, which similarly boosted its share outlook to $140 from $123.
Siding on the conservative side with Citigroup's Gardner was J.P. Morgan analyst Bill Shope, who kept his "neutral" rating on Apple shares, saying that at their current price, risk versus reward remains unfavorable.
Despite the "Hold," Gardner did round up his Apple price target by $5 to $110. But he wasn't compelled to push it further.
"We see few other positive catalysts near-term that are not already known and incorporated into consensus estimates," he explained. "While Apple will discuss Mac OS X Leopard in detail on June 11 at the Worldwide Software Developers Conference, this product will not be available until October and we do not believe that 'secret' features will be a significant catalyst for the shares from current levels."
Shares of Apple have risen 12 percent since February 12, and were up an additional 7 percent in pre-market trading Thursday morning. They're currently trading up $5.48 (or 5.57 percent) for the day at $100.83.
"To be clear, we have no issue with medium to long-term fundamentals for Apple," analyst Richard Gardner explained in a research report to clients. "Our modeling simply suggests that forthcoming products like iPhone are fairly reflected in consensus earnings per share."
Gardner said he continues to favor Apple?s long-term growth opportunity, but sees little more than market returns in the shares from their current levels.
"We would be buyers on a pull back to around $90 and believe that summer seasonality, less favorable component pricing and lack of news during the next several months may provide such an opportunity," he said.
Gardner's analysis arrives in stark contrast to a chorus of reports from over a half-dozen other Wall Street firms, each of which maintained a higher level of confidence in Apple's ability to drive it shares significantly higher.
Bear Stearns' Andrew Neff raised his price target to $143 per share from $130, citing Apple's shift "to a broader array of products with multiple drivers and a sense of what is down the road."
"We believe shares can continue to surge into calendar year end on the back of new products," commented UBS's Ben Reitzes, as he bumped his Apple price target by $9 to $133. "The thesis that Mac sales can surge is alive and well."
At ThinkEquity Partners, analyst Jonathan Hoopes reiterated his Buy rating on shares of the Cupertino-based iPod maker while increasing his target share price to $130 from $120. "The [company's] earnings upside clearly supports our 'Look at the Core' thesis," he said. "That is, Apple is a software company that manifests itself through hardware."
Things were little different over at Morgan Stanley -- if not more bullish -- where analyst Kathryn Huberty kept an 'Overweight' rating and $110 price target on Apple shares, but said she is growing more confident that the stock will reach $160 per share in the next year.
Other notable price target hikes came from Deutsche Bank, where analysts upped their mark to $140 from $130, and PiperJaffray, which similarly boosted its share outlook to $140 from $123.
Siding on the conservative side with Citigroup's Gardner was J.P. Morgan analyst Bill Shope, who kept his "neutral" rating on Apple shares, saying that at their current price, risk versus reward remains unfavorable.
Despite the "Hold," Gardner did round up his Apple price target by $5 to $110. But he wasn't compelled to push it further.
"We see few other positive catalysts near-term that are not already known and incorporated into consensus estimates," he explained. "While Apple will discuss Mac OS X Leopard in detail on June 11 at the Worldwide Software Developers Conference, this product will not be available until October and we do not believe that 'secret' features will be a significant catalyst for the shares from current levels."
Shares of Apple have risen 12 percent since February 12, and were up an additional 7 percent in pre-market trading Thursday morning. They're currently trading up $5.48 (or 5.57 percent) for the day at $100.83.
Comments
..."To be clear, we have no issue with medium to long-term fundamentals for Apple," analyst Richard Gardner explained in a research report to clients. "Our modeling simply suggests that forthcoming products like iPhone are fairly reflected in consensus earnings per share."
Gardner said he continues to favor Apple?s long-term growth opportunity, but sees little more than market returns in the shares from their current levels.
"We see few other positive catalysts near-term that are not already known and incorporated into consensus estimates," he explained. "While Apple will discuss Mac OS X Leopard in detail on June 11 at the Worldwide Software Developers Conference, this product will not be available until October and we do not believe that 'secret' features will be a significant catalyst for the shares from current levels."
OK, this I don't understand. If I'm reading this correctly, they are basically saying that there is nothing in the pipeline that is going to really add any value to Apple's stock.
Yet the notebooks are the best selling of the Mac line and I think everyone agrees that they will be released sometime in this quarter with Santa Rosa due out in a couple of weeks.
And, yes, I agree that the iPhone hype is probably already factored into Apple's current stock prices, but if a good earnings report can drive the stock up, then wouldn't another good earnings report do the same?
And if new iMacs also appear this quarter, then the earnings report next quarter should show some impressive growth in the overall Mac market share again.
But what do I know....I'm not an analyst.
OK, this I don't understand. If I'm reading this correctly, they are basically saying that there is nothing in the pipeline that is going to really add any value to Apple's stock.
Yet the notebooks are the best selling of the Mac line and I think everyone agrees that they will be released sometime in this quarter with Santa Rosa due out in a couple of weeks.
And, yes, I agree that the iPhone hype is probably already factored into Apple's current stock prices, but if a good earnings report can drive the stock up, then wouldn't another good earnings report do the same?
And if new iMacs also appear this quarter, then the earnings report next quarter should show some impressive growth in the overall Mac market share again.
But what do I know....I'm not an analyst.
Typically a strong quarterly report from AAPL results in a sell off of shares.
However, with the SEC scandal out of the way, the utter failure of Vista and strong growth #s in a traditionally week quarter...Apple just got a whole lot more attractive.
Gardner's analysis arrives in stark contrast to a chorus of reports from over a half-dozen other Wall Street firms, each of which maintained a higher level of confidence in Apple's ability to drive it shares significantly higher.
I agree, Gardner is not only crazy, he's plain wrong. I actually think Wu is spot on with his targets.
How can Apple ever meet anyone's target prices if they keep upping them?
Analysts are upping the target price when Apple is growing its business and thus AAPL is on course to exceed the previous target. How is it a bad thing? The question among analysts, even Citigroup, is "by how much should we raise the target price." They think that Apple is doing good or great.
this product will not be available until October and we do not believe that 'secret' features will be a significant catalyst for the shares from current levels."
Ok, so somebody has to be doubting Apple's growth. As a reasonable analyst, there are not many signs, objectively, that would suggest hitting a $140 price tag. After all, a great deal of all this news has gone into the current stock price. That said, this guy doesn't know what he's doing. While 'secret' features may or may not be a catalyst, he doubts that they could impact the stock price.
I have been watched AAPL every day since 2002 when I invested. There is far greater precedent for new product anouncements to boost the stock permanently. Likely the reason why Apple has concealed features is that they will strike at the core competencies of large companies like Microsoft. These will likely hit bit with the stock. There is risk however that they will flop and if they flop, the stock might tank a bit. That said, I can not imagine a scenario in which the features are not a signficant catalyst, negative or positive.
The analyst should detail the risk/reward more than dismiss the possibility for gains.
CITIGROUP IS DEAD WRONG ON AAPL. look at their own stock...flat for years...each time they are wrong about something, they lose their best customers. Imagine how many people sold their aapl in the 70s and only to get back in after the earnings report in the mid 80s?
WTF did you just say? You sound like an analyst!
OK, this I don't understand. If I'm reading this correctly, they are basically saying that there is nothing in the pipeline that is going to really add any value to Apple's stock.
Yet the notebooks are the best selling of the Mac line and I think everyone agrees that they will be released sometime in this quarter with Santa Rosa due out in a couple of weeks.
And, yes, I agree that the iPhone hype is probably already factored into Apple's current stock prices, but if a good earnings report can drive the stock up, then wouldn't another good earnings report do the same?
And if new iMacs also appear this quarter, then the earnings report next quarter should show some impressive growth in the overall Mac market share again.
But what do I know....I'm not an analyst.
But the iPhone, Mac sales, etc have already been built into the price. What else you got to push the stock higher?