Wells Fargo maintains neutral outlook on Apple, says market expectations too high

Posted:
in AAPL Investors edited January 2015
Wells Fargo Securities continues to go against the grain with a neutral "market perform" rating on shares of Apple, forecasting that shares will trend lower in the face of high expectations on Wall Street.




Analyst Maynard Um raised his "valuation range" on AAPL stock Monday to between $100 and $110, below the company's $112.40 trading price as of last closing price. Though his estimates were revised higher, Um sees shares of Apple dropping due to what he called a "high sentiment bar."
Since Wells Fargo downgraded AAPL in Jan. 2014, shares have increased more than $30.
"Apple is coming up on tougher compares and, in particular, we are cautious on the lack of new large carrier additions in the December quarter, which has had at least one new large carrier addition in the past," Um wrote in a note to investors.

The analyst said he believes Apple will have to "materially beat" market expectations in order to move its stock upward. His own forecasts call for Apple to sell 67 million iPhones in the just-concluded December quarter, with a gross margin of 39.6 percent.

Um also expressed concern over Apple's next product cycle, particularly with regard to the low-end 16-gigabyte capacity for the iPhone and iPad. The analyst said that 16 gigabytes does not appear to be sufficient for modern devices, and raising the minimum storage to 32 gigabytes could affect average selling prices and margins.

Wells Fargo and Um originally downgraded AAPL stock to its "market perform" rating in January of 2014. Since Um made that proclamation, shares of Apple have grown more than $30 from a pre-split price of $79.02.

Um's concerns about Apple's gross margins make him stand out on Wall Street, where investor and analyst expectations have generally been very high in recent months. The company is set to report its fiscal 2015 first-quarter earnings Tuesday afternoon after markets close.
«1

Comments

  • Reply 1 of 33
    I could never trust an analyst whose last name 'um' ... sounds like a pause?
  • Reply 2 of 33
    Um...no. Just no.

    Imagine a world without analysts.
  • Reply 3 of 33
    Maynard G. Krebs?
  • Reply 4 of 33
    wdowellwdowell Posts: 209member
    It's funny how many ? insider followers are dismissive of opinions of apple analysts and share prices - unless of course it is high at which point they like to laugh at other companies with lower stuff.

    At the end of the day sentiment is what runs the show - not necessary accurate rational thinking
  • Reply 5 of 33
    technotechno Posts: 707member
    Quote:
    Originally Posted by wdowell View Post



    It's funny how many ? insider followers are dismissive of opinions of apple analysts and share prices - unless of course it is high at which point they like to laugh at other companies with lower stuff.



    At the end of the day sentiment is what runs the show - not necessary accurate rational thinking



    Except that many of these analysts prove to be wrong (as we see from Um) and they tend to use the "throw stuff against the wall and see what sticks" method of analyzation. We see articles like this and think stock manipulation. There is a reason the Apple faithful are so faithfully bias, and that is due to our AAPL shares.

  • Reply 6 of 33
    Sell! Sell! Sell!
  • Reply 7 of 33
    jungmarkjungmark Posts: 6,716member
    "apple has to prove me much more wrong than my guesstimate " -various analysts.
  • Reply 8 of 33
    blastdoorblastdoor Posts: 1,954member

    His points aren't all bad. Apple's P/E right now is pretty high relative to Apple's P/E in the past. That means people do have very high expectations for this latest quarter and for what Apple's guidance will be going forward. If those expectations are met the stock price will, at best, just stay where it is. 

     

    Wall Street is generally biased against Apple, in the sense that Apple is so different from all the other companies they follow. It's just very hard for them to see how a company that is not a monopolist, and has no clear path towards become a monopolist, can sustain high profits over time. 

  • Reply 9 of 33
    tedktedk Posts: 16member
    Except Maynard Dum doesn't realize that China Moble is the carrier add this time. A year later CM now has their 4G network up and running, which will make all the difference. China sales will prove to be huge this year - when CM was added last year they only had a 3G network....
  • Reply 10 of 33
    coolfactorcoolfactor Posts: 1,534member
    Quote:

    Originally Posted by techno View Post

     



    Except that many of these analysts prove to be wrong (as we see from Um) and they tend to use the "throw stuff against the wall and see what sticks" method of analyzation. We see articles like this and think stock manipulation. There is a reason the Apple faithful are so faithfully bias, and that is due to our AAPL shares.




    Yup. Analysts quite often don't *care* about Apple, the company and products, only how much money they can make from its stock. Really is sickening to watch that from the outside. Leeches.

  • Reply 11 of 33
    pazuzupazuzu Posts: 1,728member
    Wise as Apple is too leveraged with its IPhone alone.
  • Reply 12 of 33
    pazuzupazuzu Posts: 1,728member
    Funny he doesn't seem very bullish on the AWatch. Not a mention.
  • Reply 13 of 33
    rob53rob53 Posts: 2,086member

    "Um also expressed concern over Apple's next product cycle, particularly with regard to the low-end 16-gigabyte capacity for the iPhone and iPad. The analyst said that 16 gigabytes does not appear to be sufficient for modern devices, and raising the minimum storage to 32 gigabytes could affect average selling prices and margins."

     

    He's not only an analyst but a technical expert. What technical background does he have to make statements like this? 16GB is fine for a lot of people, just not for those who want to carry half of the iTunes library or every photo they've ever taken on their phones. I'd like to see valid numbers collected (maybe Apple actually already does this) that show how much data space is actually used on iPhones. Until this happens, this Um guy needs to come up with something else. Doubling the data size from 16 to 32GB wouldn't affect Apple's bottom line very much anyway. The charge $100 more to go from 16GB to 64GB on an iPhone 6, which probably doesn't cost them more than $5 so how would this affect Apple's margins? It affects the average selling price (up) but so what?

     

    As for P/E level, AAPL has been low for a long time without any valid reason. If AAPL's P/E ratio was the same as Google or Amazon (two companies that don't sell a product they've built, they just sell marketing), their share price would be through the roof. AAPL's P/E ratio is contradictory to what normal investors think about a stock. With AAPL's low P/E investors should be downgrading this stock but they aren't, except for a few who are working their own angles. 

  • Reply 14 of 33
    solipsismysolipsismy Posts: 5,099member
    Maynard G. Krebs?

    Someone is showing their age. :D
  • Reply 15 of 33
    solipsismysolipsismy Posts: 5,099member
    pazuzu wrote: »
    Funny he doesn't seem very bullish on the AWatch. Not a mention.

    Funny you think that means something.
  • Reply 16 of 33



    "

    Quote:


    Since Wells Fargo downgraded AAPL in Jan. 2014, shares have increased more than $30. 


     

    Of course, something like this makes it a little easier to be dismissive.

  • Reply 17 of 33
    Anyone betting he or they are betting on a slide in stock value and hoping this silliness can push the market. But history has shown Apple stock has little to no relevance to Apple performance in sales and profits - so it's a waste of effort.
  • Reply 18 of 33
    mpantonempantone Posts: 1,429member
    Quote:
    Originally Posted by wdowell View Post



    It's funny how many ? insider followers are dismissive of opinions of apple analysts and share prices - unless of course it is high at which point they like to laugh at other companies with lower stuff.



    At the end of the day sentiment is what runs the show - not necessary accurate rational thinking



    No, the problem is that many of these analysts are typically wrong and AppleInsider makes zero effort in trying to rate the accuracy of individual analysts. Because of this, people here have a naturally tendency to scoff at these analysts since the latter's track record is piss poor.

     

    This also devalues AppleInsider since many of us assume that the analyst in question is wrong. The forces that influence the stock market are very complex and one analyst's opinion is meaningless.

     

    If you're a customer, at the end of the day, whether or not you are satisfied with Apple's offering is what is important.

     

    If you're a stockholder, at the end of the day, whether or not Apple has sufficiently increased shareholder value in your eyes is what is important.

  • Reply 19 of 33
    slurpyslurpy Posts: 5,179member
    Quote:

    Originally Posted by sog35 View Post

     

     

    Wise?  This same tool downgraded Apple when it was $80.  He just lost his clients 30% return.

     

    Total BS that Apple is too leveraged with iPhone.  People buy iPhone's not just because of the hardware.  They buy it for the ecosystem, OS, apps, experience, ect.

     

    You say they are too leveraged but what about Google?  95% of their profits comes from adverstising.  BMW makes 100% of their profits from cars. Exxon makes 100% from oil.  Stop with the BS trash.


     

    Agreed. This "focused too much on iPhone" drivel I keep hearing is so mind-numbingly idiotic. The iPhone isn't in a vacuum. The sale of every iPhone benefits Apple in so many other ways, from ecosystem to apps to higher chances of another Apple device category being bought by the purchaser. Yes, the iPhone is by far their most successful product, but it is obviously also their most important product, and the one that SHOULD be the most successful. That being said, even if you completely eliminate the iPhone, Apple would still be an INSANELY successful company, with a bunch of other insanely successful product categories, that will only keep growing and expanding. 

  • Reply 20 of 33

    Wow!  This dude really is a prick.  What's worse, he's an ignorant prick.  He must be costing his clients a bundle with his poor analytical skills.  I don't care what he says.  Maybe Apple's share price won't rise because that is at the whims of greedy investors.  I do know that Apple is making a bundle of money and compared to most other tech companies, Apple sales are excellent.  Revenues and profits must be at an all time high and if Mr. (d)Um(b) wants to devalue Apple's share price then let him do so.  As long as Apple is making money, they'll continue to increase my fine dividends.  Why these analysts want to measure Apple against companies nearly half Apple's market cap is beyond me.  Apple is in a unique territory.  $170 billion in cash says Apple can expand into new areas to create more revenue.

     

    I don't know if Apple can do a lot better than what it is doing but I think Tim Cook is doing his best and I'm very satisfied with how Apple is being run whether Wall Street likes it or not.  I think Apple needs to take it easy until its new headquarters are set up.  If Apple doesn't increase it's earnings for another year, I'm perfectly satisfied with where it is.  These people continue to value Microsoft higher than Apple and I really don't understand why Microsoft trades at a higher premium than Apple in terms of P/E.  Microsoft's mobile footprint is really poor and that's where it's all at and should be for some time to come.  Google's P/E has been climbing back and I don't see any reason for it to be doing so.  I really don't hear much news about this company except in terms of future projects.  Mozilla's Firefox dumped Google as the default search engine so I don't consider that good news at all.  Apple could eventually do the same thing on both platforms and that would be a huge loss for Google.

     

    Best of luck to fellow Apple shareholders and don't be too disappointed if Apple's share price doesn't do a Netflix.  I only hope the share price doesn't drop but if it does I'll still buy more Apple stock just for dividend's sake.  The market is rigged against Apple for reasons I'm quite unclear about.  But if that's the way it has to be then so be it.  It's not Apple's fault because they did almost everything possible to make the stock attractive to institutional investors with buybacks and dividends.  I don't know what else there is for Apple to do except try to double revenue which is not something that will be easy to do.

Sign In or Register to comment.