Analysts divided on Apple: Cantor calls it a 'top pick,' Wells Fargo downgrades citing margins
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."
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.
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.
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.
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.
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.
Comments
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.
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.
If Wall Street is a joke then why does anyone care about it?
"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
"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.
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.
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.
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.
They make most of their monies buying and selling via commission regardless of your profit
if you invest read the small print
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.
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.
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?