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Wells Fargo defends 'market perform' rating on Apple stock, says company is in midst of transition

post #1 of 40
Thread Starter 
Having downgraded its rating on Apple stock in January, Wells Fargo on Friday defended their neutral outlook for the company's near future, characterizing it as a long-term opportunity for investors that faces near-term hurdles while the industry transitions.




Analyst Maynard Um said in his latest note to investors, a copy of which was provided to AppleInsider that he believes Apple and its peers are in the midst of a transition phase -- one where Apple may struggle in the short term. In his view, the rise of modern smartphones, which led to Apple's astounding success in recent years, has already gone through two phases: ecosystem creation (2007-2010), and a focus on establishing market share (2010-2013).
Wells Fargo sees downward pressure on Apple's margins in the near future, and has given the company's stock a "market perform" rating.
Um believes those phases are now in the past, while the industry is now in the midst of driving usage of applications, services, and the so-called "Internet of things." At the moment, companies are focusing on extending their ecosystem to include physical devices, which includes the recent interest in wearable electronics and connected devices.

This is what Um believes is "phase three" of the industry's transition, and he says it's now well underway.

In the near-term, Um believes Apple will join the trend and enter the wearable and connected device markets. He forecasts that devices like a rumored "iWatch" could allow Apple to learn more about its users in helpful ways that would further tie them into the company's ecosystem of devices.

In the current phase, platforms like Android Wear and other wearable devices are already seeking to tie users in to the ecosystem of devices by offering them new and meaningful ways of interacting with technology.




Um's anticipated "phase four" will be to enhance these ecosystems by leveraging "Big Data" collected from users. He sees these efforts being driven by machine learning, or artificial intelligence.

"By combining data points such as age, gender, location, calendar information, behavioral history, or even data mined from e-mails, like travel itineraries (and much more), Apple could effectively become a more proactive personal assistant," Um said. "Hence, the ultimate goal of this phase will be likely to offer a value-add service to not only simplify, but also become a more proactive personal assistant."

During this transition, Um doesn't believe the focus for many companies will yet be monetization. Instead, companies will be focused on making their ecosystem of services and devices more useful.

It's finally in Um's predicted "phase five" that monetization would become the focal point. However, he said companies could find other ways of profiting, and break from traditional monetization models.




One of the "radical" changes to how a company like Apple turns a profit, Um said, could be allowing users to give permission to applications and devices to access their personal data. Apple could then charge for this access and profit from other parties.

"For example, a user can allow a healthcare provider to access iWatch health and exercise data directly in-app to get lower premiums," he said. "In this model, we note that the distribution of 'ads' (or really, value) is driven by the distribution of apps. Hence, Apple's ecosystem provides a powerful distribution platform for companies that may be looking to use their own apps to drive targeted marketing opportunities."

It's in getting to this mythical "phase five" that Um sees hurdles and challenges for Apple. He said on Friday that there are certain changes that the company must implement if it wants to find success, including "improvements on user identification to authenticate data, more sophisticated and back-end data access, deeper analytics platforms, greater ad service capability combined with app creation capability, privacy, and security, to name a few."

Um said he sees "phase five" opening up more market-cap opportunity for Apple, though the interim phases will require "a lot of work" that may not be as profitable. For that reason, he has maintained is "market perform" rating bestowed upon Apple since January.

In the near-term, he's concerned about gross margins for the company's next iPhone, as margins have historically taken a hit with each of Apple's major smartphone redesigns. He also sees limited market capitalization opportunities in its current markets, as well as new areas of expansion such as television and a smart watch.

In its "market perform" rating, Wells Fargo has a projected valuation range for AAPL stock between $505 and $575. The company is currently within that range, trading at around $521 as of Friday morning.
post #2 of 40
He forgot to include the connected toaster
post #3 of 40
Quote:
Originally Posted by buckalec View Post

He forgot to include the connected toaster


And the robots, too !

There is more stupidity than hydrogen in the universe, and it has a longer shelf life.

Frank Zappa

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There is more stupidity than hydrogen in the universe, and it has a longer shelf life.

Frank Zappa

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post #4 of 40
Who cares?
post #5 of 40
Do You Know WHO THE HELL " WELLS FARGO " IS ?

Wells Fargo, Rio Tinto, Getco ( HIGH FREQUENCY TRADER ), etc. etc. TO NAME A FEW !


They're ALL BAGMEN OF VILLAIN !!!!!!
post #6 of 40
These guys mouths move but all I hear is "blah, blah, blah"
post #7 of 40
And he forgot door locks.
post #8 of 40
I want my cats to be connected too.
post #9 of 40
Don't forget the connected toilet. If you forgot to flush you can do it from the other room.
post #10 of 40
AI has become quite the mouthpiece for blowhard analysts with lousy track records.

Their loyalty certainly is certainly not on the side of the readers. If it was (see Philip Elmer de Witt for the difference) stories like this would critically analyze these claims instead of regurgitating them.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #11 of 40

Worst. Best. Television. Icon. Ever.

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

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Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already f*ed.

 

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post #12 of 40
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Originally Posted by Tallest Skil View Post



Worst. Best. Television. Icon. Ever.

Hahaha!

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #13 of 40

Really?  They think somebody is going to make a lot of money selling internet-connected washer/driers?

 

All the phases are just things we already have with a wifi antenna stuck on them.

 

I felt this report showed a lack of imagination.  I predict Wells Fargo will be backpedaling frantically as Apple knocks it out of the park not in Phase Five, but over the course of 2014.

post #14 of 40
Quote:
Originally Posted by 512ke View Post

Really?  They think somebody is going to make a lot of money selling internet-connected washer/driers?

All the phases are just things we already have with a wifi antenna stuck on them.

I felt this report showed a lack of imagination.  I predict Wells Fargo will be backpedaling frantically as Apple knocks it out of the park not in Phase Five, but over the course of 2014.

They make these phony predictions to influence the direction of the stock. There is no penalty attached to such bloviation.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #15 of 40
And which company has the most successful eco system with the most proven high paying customers in the galaxy Universe? Oh, wait a minute ... let me think?
Been using Apple since Apple ][ - Long on AAPL so biased
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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, SE30, IIFx, Towers; G4 & G3.
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post #16 of 40
Um's main point shouldn't go unchallenged. He's suggesting that Apple sell out its users to third parties (excuse me, "provide access") as part of its next critical growth stage. In other words, be like Google.

Dammit, Um, it's about ethics. Can you try to remember that?
post #17 of 40
Quote:
Originally Posted by HAMETA View Post

Do You Know WHO THE HELL " WELLS FARGO " IS ?

Wells Fargo, Rio Tinto, Getco ( HIGH FREQUENCY TRADER ), etc. etc. TO NAME A FEW !


They're ALL BAGMEN OF VILLAIN !!!!!!

 

Colorful you are.

post #18 of 40

He's brave laying out those phases ahead of time, usually you need an historical perspective to do that kind of thing. He's also going on the assumption that the various tech firms have no better imagination than he does.

post #19 of 40
post #20 of 40
More useless blather from useless Wall Street chuckleheads. These people are clueless on the tech sector. Or any sector for that matter.
post #21 of 40
What (his type of) capitalism likes more than anything is gathering rent. Once you own something you can rent out, it's great. You do stuff all and get paid fot it. And it just keeps coming in, nice and steady, predictable, forever.

That's what this guy is saying. Apple needs to up its subscription models. Product sales are once off, and they can flatline any day. Lock in some nice rent streams. Like selling user data.

Apple doesn't want to align with the standard capitalist model. So it's going to get blowback like this all the time.
post #22 of 40
Quote:
Originally Posted by 512ke View Post
 

Really?  They think somebody is going to make a lot of money selling internet-connected washer/driers?

 

https://www.youtube.com/watch?v=FL2Ndr18wU4&t=2m34s

Life is too short to drink bad coffee.

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Life is too short to drink bad coffee.

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post #23 of 40

This is the same Wells Fargo that received $25bn in taxpayer money via TARP. When Apple is taking taxpayer money to stay afloat, Wells Fargo can comment. Until then...

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post #24 of 40
Quote:
Originally Posted by Zoolook View Post

This is the same Wells Fargo that received $25bn in taxpayer money via TARP. When Apple is taking taxpayer money to stay afloat, Wells Fargo can comment. Until then...

They didn't need it.
"Few things are harder to put up with than the annoyance of a good example" Mark Twain
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"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
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post #25 of 40

Well that does it.  I am closing my Wells Fargo accounts and refinancing my mortgage with someone else!

 

/s

post #26 of 40
Quote:
Originally Posted by dasanman69 View Post


They didn't need it.

No, neither did half a dozen other banks who took it (including the one I work for). But they benefited from the additional liquidity.

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post #27 of 40
Quote:
Originally Posted by Zoolook View Post

No, neither did half a dozen other banks who took it (including the one I work for). But they benefited from the additional liquidity.

My understanding is that is was forced on them. Btw who wouldn't benefit from additional liquidity? 1smile.gif
"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
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"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
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post #28 of 40
Quote:
Originally Posted by dasanman69 View Post


My understanding is that is was forced on them. Btw who wouldn't benefit from additional liquidity? 1smile.gif

The banks agreed to take it mutually, to avoid any being targeted for a run or short-selling - but when you look at when banks actually paid it back, you'll get a sense of who really needed it even if they didn't think so at the time. Personally I think of all them 'needed' it to avoid a liquidity freeze in the system, which is why it was offered in the first place. Many people (including my colleagues) might disagree.

 

My first comment was tongue-in-cheek anyway... it just seems rich some of these finance companies passing judgement on tech companies, which are often far better run as financial institutions.

Do not overrate what you have received, nor envy others.
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post #29 of 40
Quote:
Originally Posted by Tallest Skil View Post



Worst. Best. Television. Icon. Ever.

It has rounded corners. Could it be the fabled Apple TV?

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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post #30 of 40
Quote:
Originally Posted by Zoolook View Post

My first comment was tongue-in-cheek anyway... it just seems rich some of these finance companies passing judgement on tech companies, which are often far better run as financial institutions.

In that case I'm in total agreement. 1wink.gif
"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
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"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
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post #31 of 40
Quote:
Originally Posted by 512ke View Post

Really?  They think somebody is going to make a lot of money selling internet-connected washer/driers?

All the phases are just things we already have with a wifi antenna stuck on them.

I felt this report showed a lack of imagination.  I predict Wells Fargo will be backpedaling frantically as Apple knocks it out of the park not in Phase Five, but over the course of 2014.

Analysts are better at hindsight than foresight. Maybe they should stick to that and stare at their own asses all day.

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
Reply

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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post #32 of 40
Mythical strep five to be the hurdle?
Lol

Apple is akready ahead if competition in most of the issues he brough up.. Ahead by a wide margin
post #33 of 40
Um...
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post #34 of 40

I thought it was:

 

Phase 4:   ???

post #35 of 40
45 2a3 300b 211 845 833
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45 2a3 300b 211 845 833
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post #36 of 40
Quote:
Originally Posted by jbcaro View Post

Don't forget the connected toilet. If you forgot to flush you can do it from the other room.

 

Bill Gates is hard at work on the toilet issue... He knows his "shit" and that's a fact!

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #37 of 40
Quote:
Originally Posted by Suddenly Newton View Post


Analysts are better at hindsight than foresight. Maybe they should stick to that and stare at their own asses all day.

Wells Fargo and JP Morgan have recently been handed their asses for not being able to perform up to their own projections of their own businesses. It takes some balls to go out and talk smack about other companies.

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #38 of 40
Quote:
Originally Posted by Suddenly Newton View Post


It has rounded corners. Could it be the fabled Apple TV?

 

Too much bezel and not enough cow bell...

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #39 of 40
Quote:
Originally Posted by Flaneur View Post

Um's main point shouldn't go unchallenged. He's suggesting that Apple sell out its users to third parties (excuse me, "provide access") as part of its next critical growth stage. In other words, be like Google.

Dammit, Um, it's about ethics. Can you try to remember that?

 

Ethics and Banking parted ways several decades ago. I know it sounds like he's saying Apple should be like Google, but he's really suggesting Apple should sell it's customer's date like a bank does...

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #40 of 40
Quote:
Originally Posted by SpamSandwich View Post


They make these phony predictions to influence the direction of the stock. There is no penalty attached to such bloviation.

 

I was going to link a wall street journal article showing where they (Wells Fargo) have been sued over misconduct, but it's behind a pay wall. You can find it via google if you're interested.

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