Barclays downgrades rating on Apple stock due to maturing smartphone market, tells investors to 'ste

Posted:
in AAPL Investors edited February 2014
Shares of Apple stock slid Thursday morning after investment firm Barclays Capital lowered its rating on shares of the iPhone maker, saying it doesn't expect the stock to break out of its current trading range within the next year, and suggesting its performance could become comparable to that of rival Microsoft.

Barclays


Analyst Ben A. Reitzes issued a note to investors, provided to AppleInsider, in which he advised them to "step aside," citing a maturing smartphone market that he believes presents limited future growth potential for Apple's iPhone. And without a new "revolutionary" product, he doesn't believe shares of Apple will see a boost anytime soon.

"Frankly, we just couldn't quite bring ourselves to use smart watches or TVs as reasons to raise numbers -- nor were we fully convinced that these products could move the needle like new categories did in the old days," Reitzes wrote on Thursday.

The analyst said that as an iPhone user, he's "very excited" about some of the company's new products in the pipeline, with potential innovations in mobile payments, geolocation, and wearable devices. But as an investor, he doesn't see Apple introducing anything as groundbreaking from a financial perspective as the iPhone or iPad.

"We believe Apple's story is all about iPhones and 'new categories' seem to be designed to make the iPhone more useful --?but don't necessarily reaccelerate growth in the iPhone category to sustainable double-digit levels," he wrote. "If we were to see evidence that payments and/or new content deals enhance the Web services aspect of Apple vs. Google and others long-term, we may need to reassess this opinion."

Reitzes then went on to cite the valuation of Apple's rival Microsoft from 2000 to 2010, and suggested that Apple might see a similar pattern. The analyst said that he sees "no precedent" that large tech companies can broadly outperform once again after "a tough year or two."

Barclays


In his eyes, the "law of large numbers" may have caught up with Apple, and the company's gross margins may have peaked.

"As a result, there doesn't seem to be anything wrong with saying shares could be range-bound as we move from product cycle to product cycle until we can see Apple creating entirely new markets in the cloud," he said.

Accordingly, Barclays has downgraded Apple from an "overweight" rating to "equal weight," with a continued "neutral" outlook for the company. The firm's price target for shares of AAPL is $570, or about $35 higher than where it is trading as of Thursday morning.
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Comments

  • Reply 1 of 93
    maestro64maestro64 Posts: 4,453member

    yes coming from the company which paid big fines for being caught manipulating interest rates so they can rip off consumers.

  • Reply 2 of 93
    tylerk36tylerk36 Posts: 1,037member

    I think Apple knew this.  Anticipated it.  I would think there are other plans and will be revealed in 2014 or 15.  We will see.

  • Reply 3 of 93
    512ke512ke Posts: 781member
    Brave words that will be eaten by Mr. Reitzes shortly.
  • Reply 4 of 93
    Fact is, he could be right. Not that this is bad. The company has matured. Until there is evidence of something new, they will just be this predictably stable successful company.

    We put too much weight on what Wall Street says as a whole.
  • Reply 5 of 93

    Yet another anal-y-sis 

     

    I think there is something that report overlooked, the actual hardware account for a fraction of Apple revenu.  Apple is makings a lot more money selling digital media and apps than selling iOS or Mac hardware. 

  • Reply 6 of 93
    rogifanrogifan Posts: 10,669member
    Why does AI publish this garbage....the same garbage that gets trotted out on Business Insider for page views. Ooh someone compared Apple to Microsoft, quick throw up an article because we know it will get lots of clicks and will be great for trolling. :rolleyes:
  • Reply 7 of 93
    Barclay's: true visionaries. /s
  • Reply 8 of 93
    512ke wrote: »
    Brave words that will be eaten by Mr. Reitzes shortly.

    Meh. They just issue another press release.
  • Reply 9 of 93
    rob53rob53 Posts: 1,986member

    Reading other articles mentioning this and the WhatsApp acquisition came up. Facebook is a one trick pony, Google is as well (only really sells ads, the rest doesn't make them any money), Microsoft is done so why do all these idiot investment firms only see Apple in the same light? They have a lot more than just the iPhone and all of the other areas make money. What happens when people don't want to use Facebook anymore? Will Barclays downgrade them? Probably not. 

     

    @starbird73 "We put too much weight on what Wall Street says as a whole." You are absolutely correct and I'm past being tired of all the garbage these worthless people spew out of their uneducated mouths.

  • Reply 10 of 93
    john.bjohn.b Posts: 2,716member

    Additional stock buyback in 3... 2... 1...

  • Reply 11 of 93
    Translation: Apple hasn't made enough billion dollar acquisitions to bluff the market into thinking that they've bought their way into a dynamic new field of growth. C'mon, Apple, throw Barclay's analysts a bone and light a few billion on fire for some robots, or thermostats, or social apps.
  • Reply 12 of 93
    Translation: "I'm going to manipulate AAPL stock downwards so I can buy more at a discount."
  • Reply 13 of 93
    Analyst Ben A. Reitzes issued a note to investors, provided to <em>AppleInsider</em>, in which he advised them to "step aside," citing a maturing smartphone market that he believes presents limited future growth potential for Apple's iPhone.

    If you see me comin', better step aside
    A lotta men didn't, a lotta men died
    One fist of iron, the other of steel
    If the right one don't a-get you
    Then the lef' one will


    Apologies to Tennessee Ernie Ford
  • Reply 14 of 93

    Been reading this board for several years but first time post.   Yeah, I am a share holder.  I have to laugh to the responses here when investment firms downgrade APPL,   Face it folks, until Apple develops new products the stock is range bound.  I think we have been fortunate it has stayed above $500.  Apple is a growth company and until there are signs of growth, no buy back, dividend increase, etc., is going to really move the valuation or the stock price.  Its the way of the market.   I own a few shares of Tesla, unfortunately not enough, and it announced it is going to sell an additional 3-5,000 cars next year and the stock price doubled.   makes no sense, but that is the way it is....

  • Reply 15 of 93
    thomprthompr Posts: 1,510member

    Well even if Apple's business stays at zero growth, they could still buy back half of their remaining shares in 5 - 10 years, depending on repatriation tax implications or issuing debt.  If you assume their P/E stays the same (and there really isn't any room for it to go lower) then that would result in a doubling of the share price for that reason alone.  Now before anyone starts pointing out that buybacks didn't work out so well for company X, please note that all such companies began with large P/Es that needed to come down to match their level of low - or no - growth.

     

    Thompson

  • Reply 16 of 93

    He's just trying to manipulate the market so he can buy up shares at lower prices.  Then he will pump up the market and dump apple like a two-bit hooker.  It is simple to do with a company like Apple.

     

    He should go to jail.

  • Reply 17 of 93
    Ben should check the Price to Earnings multiple of MSFT circa 1999-2000 vs the PE of AAPL at its supposed pseudo-peak in 2012. MSFT was about 60. At an equivalent PE at its peak, Apple would be range bound for the next decade at a share price of $2000 - $2400. In which case, Mr. Reitzes analysis might have some validity. As it stands, he should probably be fired or sent back to sixth grade since his education seems to be range bound at about that level.
  • Reply 18 of 93
    With Facebook having some 1.2B users, wouldn't that market me saturated as well? Why hasn't their stock been down rated¿
  • Reply 19 of 93
    auxioauxio Posts: 1,959member
    Quote:
    Originally Posted by starbird73 View Post



    We put too much weight on what Wall Street says as a whole.

     

    It's more fundamental than that: the entire concept of the stock market is based on investing in something with huge growth potential.  There's no value placed on a stable, successful company with huge profits (at least, not anymore).  All of the value is placed on growth potential.

     

    Which is great for startups, but not so great for established companies like Apple.  So I think it makes sense for them to just buy back the vast majority of the stock and avoid the distraction of voices which have no real vision which is relevant to the current reality of Apple.

  • Reply 20 of 93
    auxio wrote: »
    It's more fundamental than that: the entire concept of the stock market is based on investing in something with huge growth potential.  There's no value placed on a stable, successful company with huge profits (at least, not anymore).  All of the value is placed on growth potential.

    Which is great for startups, but not so great for established companies like Apple.  So I think it makes sense for them to just buy back the vast majority of the stock and avoid the distraction of voices which have no real vision which is relevant to the current reality of Apple.

    Agreed!
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