RBC cuts Apple price target to $140, cites concerns over supply chain data

Posted:
in AAPL Investors
Investment firm RBC Capital Markets slashed its price target for Apple stock to $140 this week, saying data from the company's extensive supply chain suggests iPhone sales could shrink in 2016.




Analyst Amit Daryanani lowered estimates on AAPL for both its March and June quarters, reflecting supply chain signals, as well as his own concerns over tough comparisons during the first six months of calendar 2016.

According to Daryanani, a "host of supply chain data points" indicate that Apple's iPhone lineup is set to face difficult headwinds in March. He estimates that Apple will ship 54 million iPhones in the March quarter, which is well below Wall Street expectations of 60-million-plus units.

For fiscal year 2016, he believes Apple will ship about 227 million iPhones, which would be a 2 percent decrease year over year. He expects that year-over-year growth will resume in the June quarter and beyond.

Despite the cuts, Daryanani has retained his "overweight" rating for AAPL stock, advising investors to buy in. But he reduced his price target from a previous estimate of $150 down to $140.

Through calendar 2016, he sees AAPL stock moving "appreciably higher" thanks to increased average selling prices across iPhone models, as well as higher prices driven by the launch of the iPad Pro. He's also optimistic about a rumored new 4-inch iPhone that could target new price points, and he expects Apple's gross margins to increase during the iPhone 6s product cycle.




Investors and analysts have been spooked in recent days, after a number of key Apple suppliers cut estimates. Specifically, Daryanani cited poor outlooks from Avago Technologies, Dialog Semiconductor, Analog Devices, and Jabil Circuit.

Not all have expressed such concern over the cuts, however. Earlier this week, analyst Gene Munster of Piper Jaffray advised investors not to worry about supplier data, indicating it's unwise reading heavily into vague estimates.

Apple Chief Executive Tim Cook also said as much back in 2013, reminding investors that his company uses multiple suppliers for the same components. Apple skews orders accordingly for a variety of internal reasons, including pricing, yield rates, technology and otherwise.

"The supply chain is very complex, and we obviously have multiple sources for things," Cook said. "Even if a particular data point were factual, it would be impossible to interpret that data point as to what it meant for our business."
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Comments

  • Reply 1 of 54
    Is there any site that tracks analysts' forecasts, and then compares them to (later) actual results?

    We discuss Wall Street analysts a lot on this forum; I'd love to see some objective data on track records, devoid of the passion that sometimes blocks analysis.

    gfahey
  • Reply 2 of 54
    Is there any site that tracks analysts' forecasts, and then compares them to (later) actual results?
    TipRanks give a score between 0 - 100 to all of an analyst's forecasts, not just Apple. Daryanani got a 50% score on there, the same as a coin toss. Now, is this Daryanani relying on fresh supply data or is he serving as an echo chamber?
    genovellerogifan_oldDan Andersen
  • Reply 3 of 54
    sdw2001sdw2001 Posts: 16,929member
    So sick of hearing these analysts.  They are simply getting attention and/or driving the market.  That's the way this works...it's like the move Wall Street.  
  • Reply 4 of 54
    TipRanks give a score between 0 - 100 to all of an analyst's forecasts, not just Apple.
    Thank you. Very useful.
  • Reply 5 of 54
    sdw2001 said:
    So sick of hearing these analysts.  They are simply getting attention and/or driving the market.  That's the way this works...it's like the move Wall Street.  
    I think Tim Cook and Apple management shares the blame as they did nothing to counter the analysts' negativity. On August 24, Apple stock briefly dropped below $92 before Tim Cook sent an email to Crammer saying , essentially, "China is fine". Apple closed the day at $103. He could have done the same thing, saying something to the tune of "please don't look into our supply chain. The iPhone is doing fine". However, he elected not to do so and allow these analysts to control the narrative.
  • Reply 6 of 54
    scottw2 said:
    sdw2001 said:
    So sick of hearing these analysts.  They are simply getting attention and/or driving the market.  That's the way this works...it's like the move Wall Street.  
    I think Tim Cook and Apple management shares the blame as they did nothing to counter the analysts' negativity. On August 24, Apple stock briefly dropped below $92 before Tim Cook sent an email to Crammer saying , essentially, "China is fine". Apple closed the day at $103. He could have done the same thing, saying something to the tune of "please don't look into our supply chain. The iPhone is doing fine". However, he elected not to do so and allow these analysts to control the narrative.
    Unfortunately, he has to walk a fine line when it comes to such comments outside of quarterly statements. If you go back to that period and look at Cook's interviews he kept saying they were happy with opportunities in China. These guys know the laws let them say anything while even the "China is fine" was considered a possible violation. 

    palomineDan Andersen
  • Reply 7 of 54
    I wish the mass media weren't so beholden to Wall Street, because doing a story on how "analysts" manipulate the market for their own benefit would make for what I think would be an eye opening thing for lots of people.  In this day and age of almost anyone being able to create "news" without any real measure of credibility, these types of stock price manipulations are so very blatant and should be illegal or in the least, the analysts should be held accountable for bogus "analysis".
  • Reply 8 of 54
    adybadyb Posts: 183member
    scottw2 said:
    I think Tim Cook and Apple management shares the blame as they did nothing to counter the analysts' negativity. On August 24, Apple stock briefly dropped below $92 before Tim Cook sent an email to Crammer saying , essentially, "China is fine". Apple closed the day at $103. He could have done the same thing, saying something to the tune of "please don't look into our supply chain. The iPhone is doing fine". However, he elected not to do so and allow these analysts to control the narrative.

    But if he responds to every such report, won't the analysts control the narrative by making him (Apple) have to jump to every report they churn out?  That seems to be a worse option to me.

    Disclaimer - I hold no shares in AAPL so am ambivalent regards fluctuations in the share price!

    Dan Andersen
  • Reply 9 of 54
    How much can a CEO really say outside of earnings releases? Cook is never going to respond to supply chain rumors or investor notes based on supply chain rumors. And maybe Apple is OK with lowered expectations because they know they're going to beat them. As was pointed out in a previous thread if Apple wasn't going to meet guidance a revision would have been filed with the SEC by now.
  • Reply 10 of 54
    lkrupplkrupp Posts: 6,710member
    scottw2 said:
    Is there any site that tracks analysts' forecasts, and then compares them to (later) actual results?
    TipRanks give a score between 0 - 100 to all of an analyst's forecasts, not just Apple. Daryanani got a 50% score on there, the same as a coin toss. Now, is this Daryanani relying on fresh supply data or is he serving as an echo chamber?

    Great website. I looked up Jim Cramer for example. His rating for “profitable transactions” is only 42%. Your rate of return if you follow his recommendations is -21.8%. In other words you lose your ass if you take Jim Cramer’s advice. His ranking is 31,347 out of 34,106 and has a less-than-one star rating. And he is only one of the talking heads that babble on about Apple.

    Katy Huberty, analyst for Morgan Stanley who covers Apple has a rating of 59% and a rate of return of 14.6% and a five start rating. She is on board with the iPhone sales slip predictions in 2016.
    edited December 2015 SpamSandwich
  • Reply 11 of 54
    sog35 said:
    Every please call Apple Investor Relations:

    Phone: (408) 974-3123

    Press 2 to leave a message.

    You don't have to speak to a live person, just leave message by pressing 2.

    Say that you want Cook to address these supply chain LIES. I've left 2 messages this morning and will leave more through out the day and every day till Cook comes out and shoots down these false rumors.

    You need medication or to put down your screen and get outside and enjoy life with your friends and family. Apple, in any way, should not get you worked up so much like this. It's just a company. That's it. It's not life. Just a company that make products to sell to people. It's OK I promise. 
    magman1979fastasleepsingularity
  • Reply 12 of 54
    thrangthrang Posts: 760member
    Frankly, the real focus should be on some level of regulation of analysts. Apple produces 50M iPhones per quarter - one supplier lowers their revenue by 10% and this is extrapolated as weaker iPhone sales? Do the analysts have a complete list of Apple suppliers, or which suppliers they added or dropped? Do they know if that supplier is the only one for that part, or are their multiple sources? Do they know if Apple purchased higher-than-needed inventory up front for favorable pricing and/or availability, and thus needs less now even though their production runs are as internally estimated? Are analysts privy to any in-line production changes that might affect components used?

    The manipulation of stock price, which of course will benefit insiders who are privy to announcements before they're made public, and the superficial scraps of information they use to prop up their estimates is ludicrous and warrants SEC scrutiny. This is not a free speech issue.

    Cook said pretty much this during the conference call. Don't try and read very much into supplier data. It's will rarely tell you anything meaningful.

    And finally, the natural sales cycle for ANYTHING to ebb after the white heat of a launch. How can an analyst determine if the ebb they are guessing about is higher, lower or on target to Apple's expectations?
    Dan Andersen
  • Reply 13 of 54
    adyb said:
    scottw2 said:
    I think Tim Cook and Apple management shares the blame as they did nothing to counter the analysts' negativity. On August 24, Apple stock briefly dropped below $92 before Tim Cook sent an email to Crammer saying , essentially, "China is fine". Apple closed the day at $103. He could have done the same thing, saying something to the tune of "please don't look into our supply chain. The iPhone is doing fine". However, he elected not to do so and allow these analysts to control the narrative.

    But if he responds to every such report, won't the analysts control the narrative by making him (Apple) have to jump to every report they churn out?  That seems to be a worse option to me.

    Disclaimer - I hold no shares in AAPL so am ambivalent regards fluctuations in the share price!

    It's silly. Tim Cook is not going to refute supply chain rumors or speak out every time an analyst puts out a research note on the stock. Cook should be focused on the company not the stock price. If he manages the company well the stock price will take care of itself in the long run. 
  • Reply 14 of 54
    gatorguygatorguy Posts: 20,033member
    Just my .02, but II really do think some folks lives would be much less stressful if they didn't have any substantial position in Apple stock. There's lots of investment opportunities out there, and if one just doesn't make a good match for your portfolio or meet your expectations (and causing substantial stress!) move on to another. To complain regularly and vehemently about a particular stock's performance thinking you can change it is tilting at windmills. Jus' sayin'...
    singularity
  • Reply 15 of 54
    All, Tim Cook has to walk a very fine line when commenting about analysts remarks. Losing his job does not do Apple or shareholders good. Hell, there would be more stories about the idiotic commenting. The analysts know the SEC will not pursue them, but will pursue Tim Cook without hesitation. There were many stories about Tim Cook possibly violating SEC rules on August 24th. Let's not be shortsighted. 
    magman1979Dan Andersenbadmonk
  • Reply 16 of 54
    thrang said:
    Frankly, the real focus should be on some level of regulation of analysts. Apple produces 50M iPhones per quarter - one supplier lowers their revenue by 10% and this is extrapolated as weaker iPhone sales? Do the analysts have a complete list of Apple suppliers, or which suppliers they added or dropped? Do they know if that supplier is the only one for that part, or are their multiple sources? Do they know if Apple purchased higher-than-needed inventory up front for favorable pricing and/or availability, and thus needs less now even though their production runs are as internally estimated? Are analysts privy to any in-line production changes that might affect components used?

    The manipulation of stock price, which of course will benefit insiders who are privy to announcements before they're made public, and the superficial scraps of information they use to prop up their estimates is ludicrous and warrants SEC scrutiny. This is not a free speech issue.

    Cook said pretty much this during the conference call. Don't try and read very much into supplier data. It's will rarely tell you anything meaningful.

    And finally, the natural sales cycle for ANYTHING to ebb after the white heat of a launch. How can an analyst determine if the ebb they are guessing about is higher, lower or on target to Apple's expectations?
    Apple's Investor Relations or PR departments should be taking on false supply chain rumors (and the myriad of other phony analyst stories), not Tim Cook. Just have them forcefully come out and counter the fantasyland narrative being spun at the time. No need whatsoever for Cook to waste his time addressing every self-interested tall tale. The Investor Relations or PR department heads are not doing their job.
    edited December 2015 palomine
  • Reply 17 of 54
    freerangefreerange Posts: 1,585member
    And the shorts celebrate the holiday early... When is this country going to wake up and ban this corrupt practice. That's right, never. Because big money owns and operates this system.
    palomineDan Andersen
  • Reply 18 of 54
    Tim Cook is doing what he is supposed to be doing, running Apple. It is not his job to run Wall Street or analysts or the media. Mr. Cook is doing fine at his job, managing the long term functions of Apple, not the daily noise of the media.
    Dan Andersen
  • Reply 19 of 54
    thrang said:
    Frankly, the real focus should be on some level of regulation of analysts. Apple produces 50M iPhones per quarter - one supplier lowers their revenue by 10% and this is extrapolated as weaker iPhone sales? Do the analysts have a complete list of Apple suppliers, or which suppliers they added or dropped? Do they know if that supplier is the only one for that part, or are their multiple sources? Do they know if Apple purchased higher-than-needed inventory up front for favorable pricing and/or availability, and thus needs less now even though their production runs are as internally estimated? Are analysts privy to any in-line production changes that might affect components used?

    The manipulation of stock price, which of course will benefit insiders who are privy to announcements before they're made public, and the superficial scraps of information they use to prop up their estimates is ludicrous and warrants SEC scrutiny. This is not a free speech issue.

    Cook said pretty much this during the conference call. Don't try and read very much into supplier data. It's will rarely tell you anything meaningful.

    And finally, the natural sales cycle for ANYTHING to ebb after the white heat of a launch. How can an analyst determine if the ebb they are guessing about is higher, lower or on target to Apple's expectations?
    Apple's Investor Relations or PR departments should be taking on false supply chain rumors (and the myriad of other phony analyst stories), not Tim Cook. Just have them forcefully come out and counter the fantasyland narrative being spun at the time. No need whatsoever for Cook to waste his time addressing every self-interested tall tale. The Investor Relations or PR department heads are not doing their job.
    How exactly does Apple IR do that? Does someone call up Goldman Sachs and say "hey your supply chain rumors are bogus? I don't know what the rules are around this but my guess is Apple is not going to do anything that could potentially put it in the crosshairs of the SEC.
  • Reply 20 of 54
    freerangefreerange Posts: 1,585member
    I wish the mass media weren't so beholden to Wall Street, because doing a story on how "analysts" manipulate the market for their own benefit would make for what I think would be an eye opening thing for lots of people.  In this day and age of almost anyone being able to create "news" without any real measure of credibility, these types of stock price manipulations are so very blatant and should be illegal or in the least, the analysts should be held accountable for bogus "analysis".
    The problem is in fact the system. Short selling should be flat out banned as it is the leading cause of market manipulation. While some of you feel Cook should be out in front of this, the reality is a short term slide in the stock benefits the company and shareholders as it enables Apple to get a lower price in their multi-billion stock buyback program. The only problem is for those shareholders that need to sell some shares now. Unfortunately, I'm one.
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