UBS Wealth Management maintains cautious outlook on Apple shares
Operating independent of their investment banking counterparts, wealth management experts for UBS maintained a 'Hold' rating on shares of Apple Inc. this week, explaining that share pricing trends remain strong but present a less compelling opportunity from a risk reward standpoint.
"We have missed the rally in Apple shares but cannot justify a long position at current levels," lead analyst Tony Andersson wrote in a corporate update issued to clients on Tuesday. However, the analyst added that he sees no fundamental reason to short shares of the electronics maker despite their rich valuations and an unfavorable risk reward.
Andersson expects that Apple's strong share price momentum will continue for the foreseeable future but advised clients that his "fair value" for the stock currently falls within the $111 to $145 range.
"We are increasing our iPhone sales figures to 15 million units in calendar 2008. These iPhone sales carry higher gross margins, leading us to also increase our 2008 [estimated per-share earnings] to $4.50 from $4.06," he explained. "However, rich valuations coupled with an uninspiring technical picture makes us cautious on the shares and hence we reiterate our Hold rating."
Given the "huge number of articles written and more than 100 million hits on the web," the UBS analyst said it's unlikely many people have missed the launch of Apple's new handset, the iPhone. The free marketing, he added, has massively helped kick-start the launch and he expects the Cupertino-based company to significantly beat its 10 million phone target by calendar 2008.
"We also think Apple could launch a smaller form-factor phone in early 2008 but note that the cannibalization rates of the iPods would mitigate some of that potential upside," he wrote. "All the nice-to-have features aside, its hefty price tag and mandatory data plan are likely to keep the iPhone from reaching mass markets."
In general, UBS Wealth Management Research is recommending 'a marketweight stance' on the overall U.S. Technology Hardware sector to its clients.
"New product life cycles and redeployment of excess cash could lead to positive EPS surprises for the sector in 2007," wrote Andersson. "We view two new operating system launches as incrementally positive for PC manufacturers."
"We have missed the rally in Apple shares but cannot justify a long position at current levels," lead analyst Tony Andersson wrote in a corporate update issued to clients on Tuesday. However, the analyst added that he sees no fundamental reason to short shares of the electronics maker despite their rich valuations and an unfavorable risk reward.
Andersson expects that Apple's strong share price momentum will continue for the foreseeable future but advised clients that his "fair value" for the stock currently falls within the $111 to $145 range.
"We are increasing our iPhone sales figures to 15 million units in calendar 2008. These iPhone sales carry higher gross margins, leading us to also increase our 2008 [estimated per-share earnings] to $4.50 from $4.06," he explained. "However, rich valuations coupled with an uninspiring technical picture makes us cautious on the shares and hence we reiterate our Hold rating."
Given the "huge number of articles written and more than 100 million hits on the web," the UBS analyst said it's unlikely many people have missed the launch of Apple's new handset, the iPhone. The free marketing, he added, has massively helped kick-start the launch and he expects the Cupertino-based company to significantly beat its 10 million phone target by calendar 2008.
"We also think Apple could launch a smaller form-factor phone in early 2008 but note that the cannibalization rates of the iPods would mitigate some of that potential upside," he wrote. "All the nice-to-have features aside, its hefty price tag and mandatory data plan are likely to keep the iPhone from reaching mass markets."
In general, UBS Wealth Management Research is recommending 'a marketweight stance' on the overall U.S. Technology Hardware sector to its clients.
"New product life cycles and redeployment of excess cash could lead to positive EPS surprises for the sector in 2007," wrote Andersson. "We view two new operating system launches as incrementally positive for PC manufacturers."
Comments
"All the nice-to-have features aside, its hefty price tag and mandatory data plan are likely to keep the iPhone from reaching mass markets."
Correct me if I'm wrong (and this forum will) but didn't the "experts" say the iPod was too expensive too? Apple's ASP in digital audio players is well ahead of the competition BECAUSE people want the features.
Correct me if I'm wrong (and this forum will) but didn't the "experts" say the iPod was too expensive too? Apple's ASP in digital audio players is well ahead of the competition BECAUSE people want the features.
Really. The people that you deride were right to an extent. iPod did not get to its stellar popularity until well after the price went down and after the mini was released. Apple says the mini outsold the standard iPod.
Apple doesn't really sell on features, they often have fewer features, they sell on how well those features are done.
"However, rich valuations coupled with an uninspiring technical picture makes us cautious on the shares and hence we reiterate our Hold rating."
Uninspiring technical picture? What are they talking about?! An iPhone that is revolutionizing the mobile phone market and Leopard that will surely be a hit, don't seem uninspiring to me.
When will these so called experts learn. They still see things through dirty Windows.
"These young rock and rollers won't last" grandpa said about the Beatles.
UBS Wealth Management already hurt the pocketbooks of clients for which it did NOT buy Apple stock, because UBS's crystal ball is very cloudy. UBS will not be able to forecast exactly WHEN to buy Apple stock or when to buy MORE.
I own Apple and I am buying whenever I get additional funds. Apple is on a trajectory that is unique, and I expect it to do very well for the next 18 to 36 months.
Uninspiring technical picture? What are they talking about?!
I think he is referring to technical analysis of the stock price. It has gone up a lot,
so it might pull back for awhile, according to him. What gets me is that he predicts
that they will sell 15 million units in '08 and also says it won't reach a mass market.
How many will they have to sell to be a 'mass market'?
I think AAPL will be around $145 during the time it reports its quarterly earnings this July 25th and could very well go up to $160 with the coming of Leopard and the anticipated new iMacs. And like Oh Blal Dee Blah mentioned, next year the stock will be even higher.
I own AAPL and will buy more.
Besides this analyst is a little goofy. We've missed the rally so can't go long so hold your shares. The fundementals are bad but don't short the stock cause we're raising our targets as the iPhone is bound to be a hit but it is going to destroy Apple's lucritive iPod business because nobody can pay that much so it will be a niche player until it gets cheaper and then Apple will really be in trouble because data is too pricey.
Is there a position he won't take. Oh yeah I almost missed that he failed to predict the bankruptcy of Apple. I'm glad he is not my wealth management expert.
His 'revision' of 15 million iPhones sold in 2008 sounds very familiar. Can you remember all those 'revised' iPod estimates - and still they consistently underestimated the final sales figures, and when that happened there was no hint of any apologies or even self-questioning, just a bland: 'iPod sales have exceeded market predictions'. Suddenly, it's not they that got it wrong, but 'the market'.
Blah! Blah! Blah!
My contempt for these analysts increases from year to year - almost as much as the value of my AAPL shares!
I'm glad he is not my wealth management expert.
Apple should see a healthy profit margin thanks to the price war between AMD and Intel. And go figure Apple is selling a lot more computers, which are costing them less and less to make.
Look for AAPL shares to rebound off this Intel pull down. Intel is selling cheaper chips and that's great news for Apple. There is no other way to look at it.
Once people figure this out, and realize that Apple will see another quarter with strong profit margins, they will begin to understand why the stock has double each of the last 5 years. That's no accident.
Operating independent of their investment banking counterparts...
Kasper shows his 2nd grade grammar skills again.
Uninspiring technical picture? What are they talking about?! An iPhone that is revolutionizing the mobile phone market and Leopard that will surely be a hit, don't seem uninspiring to me.
They mean the stock's technical picture, IE how the stock chart looks. I can't disagree - stocks don't continue on a parabolic path forever, you know?
Frankly it was one of the more well-reasoned "hold" recommendations I've ever heard. They admit that they missed the rally, and they aren't saying short the stock, but if their estimation of fair value is $115-$145, then there's no sense in buying it.
Reasonable people can disagree about these things. When one is proved right and the other wrong, it doesn't make the wrong one an idiot or the correct one a genius, either.
(Myself, long with 5% (now about 10%) of my portfolio)
They mean the stock's technical picture, IE how the stock chart looks. I can't disagree - stocks don't continue on a parabolic path forever, you know?
Frankly it was one of the more well-reasoned "hold" recommendations I've ever heard. They admit that they missed the rally, and they aren't saying short the stock, but if their estimation of fair value is $115-$145, then there's no sense in buying it.
Reasonable people can disagree about these things. When one is proved right and the other wrong, it doesn't make the wrong one an idiot or the correct one a genius, either.
(Myself, long with 5% (now about 10%) of my portfolio)
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A stock stops the parabolic path when the company runs out of growth prospects!
Apple's computers are growing 3 to 4 times faster than the PC market is growing, its high-end iPods will include widescreen displays soon, the iPhone had a phenomenal launch in the U.S., and is about to be launched in Europe and Asia, opening new markets and a new revenue stream with high margins, the MacBook THIN road-warrior model is due out toward the end of the year and will revolutionize that segment, revised iMacs are coming in August, Leopard will blow away Vista in October and bring an even greater flow of Windows users to the Mac ... but, UBS says it is more worried about the risk of Apple shares that it feels are within its "fair valuation."
Hogwash!
Shares in general are at their "fair valuation" at each moment. The key to successful stock investing is to buy shares BEFORE all the announcements come out. Because after the announcements, the stock will rise again, to a NEW, HIGHER level, and then will be priced at "fair valuation" at a much higher price.
Then UBS can issue the same warning, letter for letter. UBS can change its date, and just resend the same notice.
UBS clients will miss the boat, AGAIN!
No one can say, today, when and how much Apple will increase in price, however, I feel very confident it is MUCH LOWER now, than it will be next year. My opinion is that it should be purchased now, even if you missed the price move. This is not a penny stock company. It makes best of class hardware AND best of class software. I believe the price will approach 225 to 250 by the end of 2008.
Disclosure: I am long Apple stock and I am long Apple Jan 2008 Call options at strike prices of 130, 140, 160, 180, and 200.
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A stock stops the parabolic path when the company runs out of growth prospects!
Most experienced investors would disagree. Most *stocks* stop their highest growth well before the *company* reaches it's growth apex.
Apple's computers are growing 3 to 4 times faster than the PC market is growing, its high-end iPods will include widescreen displays soon, the iPhone had a phenomenal launch in the U.S., and is about to be launched in Europe and Asia, opening new markets and a new revenue stream with high margins, the MacBook THIN road-warrior model is due out toward the end of the year and will revolutionize that segment, revised iMacs are coming in August, Leopard will blow away Vista in October and bring an even greater flow of Windows users to the Mac ...
Shares in general are at their "fair valuation" at each moment. The key to successful stock investing is to buy shares BEFORE all the announcements come out. Because after the announcements, the stock will rise again, to a NEW, HIGHER level, and then will be priced at "fair valuation" at a much higher price.
You say all this, yet you fail to see the obvious problem - everything you said in the first paragraph above is already known and priced into the stock. You don't truly believe that the stock won't go up until the company announces the product, do you? The "market" knows everything you just said, and that's why the stock has gone up just about every day for the past 60 days. You do realize that Apple, right now, is a $120 BILLION dollar company. If profits grow 100% this year, should it then be a $250 billion dollar company with 10% of the PC market and 5% of the phone market?
You sound like someone who didn't live through the crash of 99-2000, or at least someone who didn't learn anything from it.
There is a limit to what you SHOULD pay for growth. As I said, I'm still a Apple shareholder right now, but I'm definitely not a buyer. If you're not worried and considering your exit strategy, you can count on being one of those many left holding the bag and wondering why they didn't see the end coming.
This is not a penny stock company. It makes best of class hardware AND best of class software. I believe the price will approach 225 to 250 by the end of 2008.
Penny stock. penny.... stock ... Take a look at this list: http://aol.theonlineinvestor.com/large_cap.phtml
It is the 20 largest cap stocks today. Apple is about $2 billion off that list, so there may be 2-3 other stocks in there above it. I appreciate the "underdog" feelings of Apple fans and shareholders, many of whom are the same people. But Apple is no longer and underdog - it is priced like a market leader yet it is far from that in any meaningful (financial) metric. Even under the best circumstances, if Apple DOES continue growing like this for a few more years, you have to ask yourself how high a PC/Phone/ipod maker can go before it starts to come down.
It happens to all growth stocks. You can buy your deep out of the money calls and pray it goes on forever, or you can start researching SELLING those out of the money calls for a little security.
It ain't going up forever. Should Apple be worth more than Intel? More than Cisco? Citigroup? Wal Mart? Exxon Mobil? There's a limit, and the smart investor is always trying to figure out where it is.
Good luck....
================================================== =
A stock stops the parabolic path when the company runs out of growth prospects!
Apple's computers are growing 3 to 4 times faster than the PC market is growing, its high-end iPods will include widescreen displays soon, the iPhone had a phenomenal launch in the U.S., and is about to be launched in Europe and Asia, opening new markets and a new revenue stream with high margins, the MacBook THIN road-warrior model is due out toward the end of the year and will revolutionize that segment, revised iMacs are coming in August, Leopard will blow away Vista in October and bring an even greater flow of Windows users to the Mac ... but, UBS says it is more worried about the risk of Apple shares that it feels are within its "fair valuation."
Hogwash!
Shares in general are at their "fair valuation" at each moment. The key to successful stock investing is to buy shares BEFORE all the announcements come out. Because after the announcements, the stock will rise again, to a NEW, HIGHER level, and then will be priced at "fair valuation" at a much higher price.
Then UBS can issue the same warning, letter for letter. UBS can change its date, and just resend the same notice.
UBS clients will miss the boat, AGAIN!
No one can say, today, when and how much Apple will increase in price, however, I feel very confident it is MUCH LOWER now, than it will be next year. My opinion is that it should be purchased now, even if you missed the price move. This is not a penny stock company. It makes best of class hardware AND best of class software. I believe the price will approach 225 to 250 by the end of 2008.
Disclosure: I am long Apple stock and I am long Apple Jan 2008 Call options at strike prices of 130, 140, 160, 180, and 200.
I am no expert on the stock market, but cameronj has some good points, but just as a warning for you, people have been banned for stock spamming before, so you may want to ease up on this.
....but just as a warning .....people have been banned for stock spamming before.....
That would be odd (and a tad unfair), considering how often AI simply reports analyst nonsense, thus inviting precisely this sort of a discussion!
A stock stops the parabolic path when the company runs out of growth prospects!
Disclosure: I am long Apple stock and I am long Apple Jan 2008 Call options at strike prices of 130, 140, 160, 180, and 200.
Is this really in English? The first line is as broken as AI's worst.
That would be odd (and a tad unfair), considering how often AI simply reports analyst nonsense, thus inviting precisely this sort of a discussion!
I think it was more for people making up new rumors that aren't feasible to get people to think that future products will have jetpacks and the like in them so they should invest more in apple (?). I don't really understand it all that much, Just continue as if I hadn't posted.
I also agree that analyst nonsense isn't very 'newsworthy', but w/e.
http://forums.appleinsider.com/showthread.php?t=76626