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Analysts divided on Apple: Cantor calls it a 'top pick,' Wells Fargo downgrades citing margins

post #1 of 100
Thread Starter 
A pair of Wall Street analysts have come to very different conclusions on Apple stock for the start of 2014, as Brian White of Cantor Fitzgerald gave an enthusiastic recommendation for the iPhone maker, while Maynard Um of Wells Fargo downgraded AAPL shares from "outperform" to the status of "market perform."

iPhone Plus
Analyst Brian White expects a larger iPhone to arrive in 2014. Concept created by Marco Arment.


Both firms issued research notes to investors on Thursday stating their cases as to why investors should or shouldn't be excited about the prospects for Apple has the new year begins. White, of Cantor Fitzgerald, declared that Apple is his firm's top large-cap pick for 2014, declaring that he believes the next 12 months will be a "year of innovation" for the Cupertino-based corporation.

"For 2014, we expect Apple to enter new product categories, re-accelerate growth in China and deepen its offerings in existing categories," White wrote in a note provided to AppleInsider.Brian White of Cantor Fitzgerald believes 2014 will be a "year of innovation" for Apple.

Specifically, he expects Apple to release a wrist-worn so-called "iWatch" this calendar year, while he also predicts that Apple will launch new, larger iPhone models in 2014. He also believes that recent rumors of a 12.9-inch iPad are not really for a new iPad, but instead a "hybrid device" that would be bigger than an iPad but more mobile than a MacBook Air.

Finally, White is also bullish on Apple's newly announced China Mobile deal, which will see the world's largest carrier begin selling both the iPhone 5s and iPhone 5c this month. Cantor Fitzgerald has maintained its price target of $777 for Apple stock.

While White sees numerous reasons to buy shares of AAPL, Um of Wells Fargo is less confident. On Tuesday, he downgraded the iPhone maker's stock to "market perform," though he maintained his price target range of between $536 and $581 --?as of Thursday morning before the markets opened, shares of AAPL were in the middle of that range at $561.

The reason for Um's downgrade is concerns over Apple's gross margins. In particular, he expects that Apple will launch a redesigned "iPhone 6" later this year that will cut into profitability, as has occurred in every new iPhone form factor cycle previously.

iPhone 5s
Analyst Maynard Um expects a redesigned "iPhone 6" to cut into margins this year.


In addition, he believes there's a "limited amount of incremental market cap opportunity in the existing product segments Apple plays in." He believes Apple's recent market capitalization gains did not come from increased consumer spending, but instead represented the "transfer of dollars" from competitors.

"With less market cap to absorb from its peers and continued pressures on the consumer wallet, we see limited market opportunity absent material share gains," Um said.

The last concern expressed by Um as Apple heads into 2014 is a prediction by the analyst that smartphone subsidies may become less of a focus for wireless providers. AT&T's CEO hinted as much last month, when he said carriers should push toward an ecosystem devoid of subsidies for high-end smartphones.

Um believes that carriers will instead focus on driving device usage to maximize their profitability in the future. This "shifting balance of power," he said, could drag down shares of Apple.

Still, Um believes Apple had a strong just-concluded holiday season, in which he predicts the company sold 54.8 million iPhones and 24 million iPads. Apple will report its holiday quarter earnings later this month.
post #2 of 100
Why pay attention to ANY tech analysis from Wells Fargo?
post #3 of 100
And guess which one is driving Apple stock this morning. 1rolleyes.gif

One minute Apple is doomed because Wall Street doesn't think Apple can survive their competitors race to the bottom in hardware. The next minute they think Apple is doomed because they don't innovate fast enough. Now Apple gets downgraded because of "margin pressures". Well which is it Wall Street? You want Apple to have cheaper prices, new products and high margins. That's impossible. Cheap hardware and high margins are at the opposite end of the spectrum and new products always have lower margins as manufacturing is more expensive initially. Especially any new products that involve brand new manufacturing processes.
post #4 of 100
Wall Street is a joke. Just the other day Twitter was down like 15% because of a downgrade. Now this morning I see the stock has been upgraded and this week it will probably gain back everything it lost last week. 1rolleyes.gif
post #5 of 100
Quote:
Originally Posted by Rogifan View Post

Wall Street is a joke. Just the other day Twitter was down like 15% because of a downgrade. Now this morning I see the stock has been upgraded and this week it will probably gain back everything it lost last week. 1rolleyes.gif

 

If Wall Street is a joke then why does anyone care about it?

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post #6 of 100

"If Wall Street is a joke then why does anyone care about it?"

Because these players are playing with your pension savings and doing very well thank you

for themselves

post #7 of 100
Quote:
Originally Posted by William Bowden View Post
 

"If Wall Street is a joke then why does anyone care about it?"

Because these players are playing with your pension savings and doing very well thank you

for themselves

Exactly, and Wall Street drives the entire world's economy not just our pension funds. That's why stock manipulation can be so bad for everyone except those who are manipulating it. The SEC does nothing to monitor how these people get their information and which is blatantly false. 

post #8 of 100
Wells Fargo staff are too busy talking people into opening new accounts they don't need, so they can get the commission, to even know what's going on in the real world.
Enjoying the new Mac Pro ... it's smokin'
Been using Apple since Apple ][ - Long on AAPL so biased
nMac Pro 6 Core, MacBookPro i7, MacBookPro i5, iPhones 5 and 5s, iPad Air, 2013 Mac mini.
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Enjoying the new Mac Pro ... it's smokin'
Been using Apple since Apple ][ - Long on AAPL so biased
nMac Pro 6 Core, MacBookPro i7, MacBookPro i5, iPhones 5 and 5s, iPad Air, 2013 Mac mini.
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post #9 of 100
Quote:
Originally Posted by Eideard View Post

Why pay attention to ANY tech analysis from Wells Fargo?

Why pay attention to ANY tech analysis from Cantor?  Oh they said something positive so it's OK.  Why do you need to live in an echo chamber of Apple positiveness?  I think it's because you're insecure about your Apple products.

post #10 of 100
Quote:
Originally Posted by island hermit View Post

If Wall Street is a joke then why does anyone care about it?
Where else are you going to put your money? Under the mattress?
post #11 of 100
Quote:
Originally Posted by William Bowden View Post
 

Because these players are playing with your pension savings and doing very well thank you

for themselves

 

Hmmmm... if they are doing very well for themselves then your pension must be doing very well too.

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post #12 of 100

2014 is going to be another lousy year for Apple long-term investors.  Tim Cook is doing nothing to put shareholder value into Apple.  I honestly don't know why Apple doesn't use its reserve cash to create additional revenue streams.  Absolutely nothing extra is coming from their core hardware business.  Apple could easily expand into mobile payments, cloud services or get into the search engine and ad click business.  All of the top tech companies are diversifying so they don't have to rely on just one revenue stream.  Apple's reserve cash hoard is doing nothing but collecting minuscule amounts of interest which is doing nothing to increase shareholder value.  Apple's share price now isn't much better than before the China Mobile contract.  This stock is going nowhere under Apple's current leadership.

 

Apple, the company is doing well.  They're selling products, they're opening new stores and customers are happy with their products.  I'm only referring to the stock and how that money is being managed.  Apple should be able to do both if other, lesser companies can manage to do both.  Everyone seems to be jizzed-up about low-margin Chromebooks taking over the industry but how do those companies manage to hold margins selling that low-end crap.  Again, it always seems to come down to grabbing market share and not profits.  Next Wall Street will be asking why doesn't Apple sell the equivalent of Chromebooks instead of charging $1000 for MacBook Airs.  Apple stock is going to stay in the toilet and I don't see any changes taking place without additional revenue streams outside of their hardware business.

post #13 of 100
Quote:
Originally Posted by sammysamsam View Post

Why pay attention to ANY tech analysis from Cantor?  Oh they said something positive so it's OK.  Why do you need to live in an echo chamber of Apple positiveness?  I think it's because you're insecure about your Apple products.
Anyone with a username like sammysamsam is not to be taken seriously IMO. Anyway, Jim Cramer just said on CNBC that based on what Wells Fargo actually wrote in their note Apple is a buy,
post #14 of 100

They make most of their monies buying and selling via commission regardless of your profit

if you invest  read the small print 

post #15 of 100
Quote:
Originally Posted by Rogifan View Post


Where else are you going to put your money? Under the mattress?

 

Is someone twisting your arm to put it into Apple... or even stocks for that matter?

 

AAPL wouldn't be my first choice for solid gains. I'd put my money on MSFT before Apple. If you are going to play the game... then you have to play the game.

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post #16 of 100
Quote:
Originally Posted by Constable Odo View Post

2014 is going to be another lousy year for Apple long-term investors.  Tim Cook is doing nothing to put shareholder value into Apple.  I honestly don't know why Apple doesn't use its reserve cash to create additional revenue streams.  Absolutely nothing extra is coming from their core hardware business.  Apple could easily expand into mobile payments, cloud services or get into the search engine and ad click business.  All of the top tech companies are diversifying so they don't have to rely on just one revenue stream.  Apple's reserve cash hoard is doing nothing but collecting minuscule amounts of interest which is doing nothing to increase shareholder value.  Apple's share price now isn't much better than before the China Mobile contract.  This stock is going nowhere under Apple's current leadership.

Apple, the company is doing well.  They're selling products, they're opening new stores and customers are happy with their products.  I'm only referring to the stock and how that money is being managed.  Apple should be able to do both if other, lesser companies can manage to do both.  Everyone seems to be jizzed-up about low-margin Chromebooks taking over the industry but how do those companies manage to hold margins selling that low-end crap.  Again, it always seems to come down to grabbing market share and not profits.  Next Wall Street will be asking why doesn't Apple sell the equivalent of Chromebooks instead of charging $1000 for MacBook Airs.  Apple stock is going to stay in the toilet and I don't see any changes taking place without additional revenue streams outside of their hardware business.
Please explain how market share equates to margins? If you have low margins on a product how does selling more of it increase your margins? That's what people say about Amazon all the time. They sell hardware at cost and people say they'll make up for it with volume. What?
post #17 of 100
Quote:
Originally Posted by island hermit View Post

Is someone twisting your arm to put it into Apple... or even stocks for that matter?

AAPL wouldn't be my first choice for solid gains. I'd put my money on MSFT before Apple. If you are going to play the game... then you have to play the game.
Forget about Apple for the moment. Twitter was down something like 17% last week because some analyst downgraded the stock. Now today a different analyst upgraded the stock and it's up over 3% so far this morning. What fundamentally changed between last week and today? Nothing. That's what I think is a joke. And with Apple there have been several increases in price targets over the past month or so and they barely moved the stock at all. Yet today some Wells Fargo analyst wants to be talked about so they downgrade the stock and sure enough Apple is down over 1% this morning. Even Jim Cramer on CNBC thought the downgrade was odd based on what was actually written in the research note.
post #18 of 100
Quote:
Originally Posted by Rogifan View Post


Forget about Apple for the moment. Twitter was down something like 17% last week because some analyst downgraded the stock. Now today a different analyst upgraded the stock and it's up over 3% so far this morning. What fundamentally changed between last week and today? Nothing. That's what I think is a joke. And with Apple there have been several increases in price targets over the past month or so and they barely moved the stock at all. Yet today some Wells Fargo analyst wants to be talked about so they downgrade the stock and sure enough Apple is down over 1% this morning. Even Jim Cramer on CNBC thought the downgrade was odd based on what was actually written in the research note.

 

I wouldn't put my money on Twitter or Apple. It doesn't matter what these guys say.

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post #19 of 100
Quote:
Originally Posted by island hermit View Post

I wouldn't put my money on Twitter or Apple. It doesn't matter what these guys say.
Again I'm just using them as examples. I could do the same with Google when they report a decent but nothing spectacular quarter and their stock jumps over $100. Or Amazon reports another loss and their stock skyrockets the next day,
post #20 of 100
Quote:
Originally Posted by island hermit View Post

Hmmmm... if they are doing very well for themselves then your pension must be doing very well too.
Brokers make money based on trade commissions, regardless of which direction your balance is headed.
post #21 of 100
Quote:
Originally Posted by iphonenick View Post


Brokers make money based on trade commissions, regardless of which direction your balance is headed.

 

So, tell me... then what does that have to do with this story. Are we talking about commissions or are we talking about faulty analysis.

 

If we're talking about commission then these guys would make them even if we all felt that the analysis of AAPL was spot on.

 

What's the complaint?

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post #22 of 100
Quote:
Originally Posted by Rogifan View Post

Please explain how market share equates to margins? If you have low margins on a product how does selling more of it increase your margins? That's what people say about Amazon all the time. They sell hardware at cost and people say they'll make up for it with volume. What?

Don't feed the troll.

Analysts are funny. On one hand they complain about margins falling. On the other hand they complain that Apple doesn't sell cheap products with low margins.
post #23 of 100
Quote:
Originally Posted by Rogifan View Post

And guess which one is driving Apple stock this morning. 1rolleyes.gif

One minute Apple is doomed because Wall Street doesn't think Apple can survive their competitors race to the bottom in hardware. The next minute they think Apple is doomed because they don't innovate fast enough. Now Apple gets downgraded because of "margin pressures". Well which is it Wall Street? You want Apple to have cheaper prices, new products and high margins. That's impossible. Cheap hardware and high margins are at the opposite end of the spectrum and new products always have lower margins as manufacturing is more expensive initially. Especially any new products that involve brand new manufacturing processes.

The guidance is neutral to positive so I'm not sure what you're complaining about.

And there is certainly room for Apple to have a cheap product with good margins. Motorola is selling the Moto G for $180. It's an unbelievable phone for that price point and is better than the S4 mini and One mini which cost $400 and $430 respectively. Apple could match that phone in both hardware specs and build quality and sell it for $250. There you have the cheapest iPhone ever by a long shot (45% cheaper than the 4S) and it still has a profit margin of almost 39%.
post #24 of 100

Long time investor here. No big deal on todays downgrade. It's nothing but the big boys playing with the market because they need to buy back AAPL to replenish what they sold in Nov. 2013 for profit taking.  For tax purpose, they have to wait 60 or 30 days to buy it back. While the little people are selling, the big boys will be buying up cheap shares of AAPL. As soon as the big boys replenish what they sold, and maybe more, AAPL will get an upgrade or will work its way back to 2013 close. They need to back back AAPL ASAP because any good news coming out of the China deal will cause AAPL to go up without any upgrade. 

post #25 of 100
Quote:
Originally Posted by Rogifan View Post
Now Apple gets downgraded because of "margin pressures". Well which is it Wall Street? You want Apple to have cheaper prices, new products and high margins. That's impossible. Cheap hardware and high margins are at the opposite end of the spectrum and new products always have lower margins as manufacturing is more expensive initially. Especially any new products that involve brand new manufacturing processes.

Yeah and at the same time Amazon is Wall Street's darling based on super high margins .... errrr .... strike that. 

Then it must be innovation, like drones dropping packages on your heads, which btw is just around the corner. :rolleyes:

post #26 of 100
Quote:
Originally Posted by island hermit View Post

Hmmmm... if they are doing very well for themselves then your pension must be doing very well too.

Some people have no clue how investment managers make money. All they know is that they are generally wealthy and assume that something nefarious must be happening. Little do they know that management fees are only taken when managers are making money for their clients too.
post #27 of 100
Quote:
Originally Posted by Constable Odo View Post
Apple stock is going to stay in the toilet and I don't see any 

problem with it.

Apple is in good company with others who are lacklustre for WS analysts as they are delivering high earnings year after year after year….

post #28 of 100

Um isn't looking at the bigger picture. He is going on the basis that there are a limited number of people buying an iPhone. Whilst that might be true on a single year basis, it is nowhere near the "mobile phone buying population" and 2 yearly contracts means half of the iPhone owners are looking to upgrade to the new phone anyway.

 

Apple are somewhat limited on other things like Macs and iPads because you aren't getting the newer version FOC so you tend to stick with what you have bought.

 

I'd like to see Apple branching into the wearable tech area and release a 4K standalone TV but I'd also like to see them do a dedicated gaming console to compete (and destroy) the Xbox and PS4. Oh, and an Apple camera (maybe call it Iris) so I can replace the Galaxy camera I bought recently (it was heavily discounted, a very good camera for the money, shame about the overly complicated OS and hard to use design).

post #29 of 100
Maynard Um... Right, I remember his laughable predictions from the past.

Kaspar, I know the negative stories generate more heat here, but how about maintaining an official database of analyst misfires? Philip Elmer DeWitt maintains a fantastic running account of their hits and misses. If you won't do it, ask Elmer if you can keep a copy here with a link back to his site?

Simply reposting analyst drivel without an "analyst scorecard" is less than useful.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

Reply
post #30 of 100
Originally Posted by island hermit View Post

If Wall Street is a joke then why does anyone care about it?

 

People like humor. It’s sort of great.

 

Originally Posted by Constable Odo View Post
2014 is going to be another lousy year for Apple long-term investors.

 

Ya gotta start throwin’ /s’ on these.

Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
Reply

Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
Reply
post #31 of 100
Quote:
Originally Posted by SpamSandwich View Post

Maynard Um... Right, I remember his laughable predictions from the past.

Kaspar, I know the negative stories generate more heat here, but how about maintaining an official database of analyst misfires? Philip Elmer DeWitt maintains a fantastic running account of their hits and misses. If you won't do it, ask Elmer if you can keep a copy here with a link back to his site?

Simply reposting analyst drivel without an "analyst scorecard" is less than useful.

 

Hindsight is 20/20.  If you have connections providing information from deep within the supply chain and you're better at deciphering the information then by all means tell us about what is in store for Apple in 2014.

post #32 of 100
To be fair the market overall is down today - both Google and Amazon are down almost 1%, so Apple being down might not be completely tied to the WF downgrade.
post #33 of 100
Hey, WellsFargo, wanna downgrade my mortgage while you're at it?
post #34 of 100
Quote:
Originally Posted by SpamSandwich View Post

Maynard Um... Right, I remember his laughable predictions from the past.

Kaspar, I know the negative stories generate more heat here, but how about maintaining an official database of analyst misfires? Philip Elmer DeWitt maintains a fantastic running account of their hits and misses. If you won't do it, ask Elmer if you can keep a copy here with a link back to his site?

Simply reposting analyst drivel without an "analyst scorecard" is less than useful.

Here is what Maynard Um posted on October 8, 2013 about. Apple...

Wells Fargo's Maynard Um forecasts that Apple's GM could reach 40% by March.

"iPhone launch quarters typically have accounting headwinds that ease in "s" cycles; historically, "s" versions drive better gross margins. Historically, the quarter of an iPhone launch has seen accounting gross margin headwinds (which, in our opinion, makes Apple's September quarter gross margins more impressive). If our accounting reversal assumptions are correct and assuming 5s/c mix goes to two-thirds of iPhone volumes, we believe December corporate gross margins could be 39.6% (versus our 38.3% estimate)--or $0.56 in incremental EPS--without calculating any potential incremental benefits from deferred margin on component sale or warranty accruals.

The March quarter could see even greater upside potential as warranty accruals have typically seen material decreases per unit in the third quarter following an "s" version launch, which could lead to the March quarter corporate gross margin hitting 40% (versus our 38.5% estimate)--a level not seen since September 2012. While the reversals of these can vary, if we just take a holistic step back, we note that gross margins have gone up by an average of 225bps in the two quarters of launch in an "s" cycle versus the two quarters of launch in a new form factor iPhone where gross margins have decreased by an average of 225bps. Gross margin improvements, particularly if they get to 40%+ would, in our opinion, dispel high-end smartphone commoditization fears."
post #35 of 100

As someone who has been involved in K-12 education technology for 35 years, the "unnoticed challenge" to Apple and the value of its stock is coming from the Google Chromebook. 

 

Schools are moving very rapidly to the Chromebook at the expense of iPads, MacBooks and iMacs. (Windows based hardware is heavily impacted too.)  I have seen other comments in other threads that are dismissive of the Chromebook and the Google School, but let me assure you that there is a revolution underway in K-12.

 

Apple Education Reps are scrambling to try to preserve their sales in the education market.  Apple realizes it too and the evidence is in their pricing structure.  When iWork was introduced schools could license 500 copies for $250.  Over time Apple raised that volume price to $25 per copy which was still less than Office at $43 per copy.  Now to compete with Google, the new version Pages, Keynote and Numbers are free.

 

The only other rapid change in school technology that I can compare this to in my career was way back when VHS tapes and TVs replaced 16mm films and projectors.

post #36 of 100
That’s more like it, two different opinions and two different recommendations. Beautifully points out the crapshoot nature of the stock market. Step right up ladies and gentlemen. Place your bets on the Wall Street Roulette Wheel. It was good year for my retirement account that I’m now using. It makes my financial advisor look like a frickn’s genius. The balance is higher even after receiving monthly checks. Now let’s what he looks like after the shit hits the fan sometime on the future. Then he’ll probably look like a moron who missed the correction.

The Wall Street Casino is open but remember, the house always wins!
post #37 of 100
Quote:
Originally Posted by eseexp View Post
 

As someone who has been involved in K-12 education technology for 35 years, the "unnoticed challenge" to Apple and the value of its stock is coming from the Google Chromebook. 

 

Schools are moving very rapidly to the Chromebook at the expense of iPads, MacBooks and iMacs. (Windows based hardware is heavily impacted too.)  I have seen other comments in other threads that are dismissive of the Chromebook and the Google School, but let me assure you that there is a revolution underway in K-12.

 

Apple Education Reps are scrambling to try to preserve their sales in the education market.  Apple realizes it too and the evidence is in their pricing structure.  When iWork was introduced schools could license 500 copies for $250.  Over time Apple raised that volume price to $25 per copy which was still less than Office at $43 per copy.  Now to compete with Google, the new version Pages, Keynote and Numbers are free.

 

The only other rapid change in school technology that I can compare this to in my career was way back when VHS tapes and TVs replaced 16mm films and projectors.

 

Complete nonsense. You have absolutely no objective evidence for your claim. None. The sales figures don’t agree. Complete baloney from a zero day troll touting the latest Apple killer product.

post #38 of 100
Quote:
Originally Posted by Tallest Skil View Post
 

 

People like humor. It’s sort of great.

 

It's the reason I keep coming back to AI.

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post #39 of 100
Originally Posted by eseexp View Post

Schools are moving very rapidly to the Chromebook at the expense of iPads, MacBooks and iMacs. 

 

Total lies.

 

…let me assure you that there is a revolution underway in K-12.

 

Let me assure you that you couldn’t be further from the truth if you weren’t being paid.

 
Now to compete with Google, the new version Pages, Keynote and Numbers are free.

 

lol, no.

 
way back when VHS tapes and TVs replaced 16mm films and projectors. 

 

Except thousands of schools still use overhead projectors because they’re the simplest non-idiotic way to present something interactive.

Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
Reply

Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
Reply
post #40 of 100
Quote:
Originally Posted by lkrupp View Post
 

 

Complete nonsense. You have absolutely no objective evidence for your claim. None. The sales figures don’t agree. Complete baloney from a zero day troll touting the latest Apple killer product.

 

http://googleenterprise.blogspot.ca/2013/02/a-look-back-at-2012-expansion-of.html

 

2,000 public school systems and private schools have adopted Chromebooks.  That was last February.  2,000 is surely a drop in the bucket, but the rate is what should be examined.  That number was a 100% increase from the number 3 months prior.

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