Wall Street adjusts Apple expectations after Tim Cook 'rips the Band-Aid off'

Posted:
in AAPL Investors edited January 2016
Though Apple had a respectable December quarter, the company's outlook for the following three months calls for iPhone sales to decline for the first time ever. Analysts on Wall Street responded by trimming their price targets, though most still believe investors should buy in.




The following is a roundup of analysts tracked by AppleInsider and their reactions to Apple's results for its first quarter of fiscal 2016.

FBR & Co.



Looking forward to Apple's March quarter, CEO Tim Cook "ripped the Band-Aid off," analyst Daniel Ives wrote in a note to investors. Though he feels Apple's December quarter was better than some had feared, it was the guidance for the next quarter that took center stage.
Most analysts still rate Apple a buy, but a number of firms cut their price targets after this week's earnings call, including FBR, J.P. Morgan and UBS.
"With the Street widely expecting a softer March guide, we would characterize a 50-million-plus iPhone bogey as 'better than feared,' although this was nothing to write home about," he said. "Clearly, Cook & Co. have a few tough quarters ahead until we get to the buildup around iPhone 7 later this year, which is what bulls (including ourselves) are focused on to turn this ship back into growth waters."

FBR has maintained its "outperform" rating for AAPL stock, but the firm trimmed its price target on Wednesday from $150 to $130.

Macquarie Research



Analyst Ben Schachter credited Apple for being "loud and clear" on upcoming macro weakness in the March quarter. He believes Apple's share price will bottom out soon, but warned that investors shouldn't "expect a quick rebound."

"in our view, aside from the macro, investors should read too much into the declining iPhone beyond the simple fact that there was massive pent-up demand for a larger screen," Schachter said. "AAPL is still taking share and we expect that to continue."

Like most others, he believes a so-called "iPhone 7" will return Apple's hot selling handset lineup to growth at the end of 2016 and heading into 2017.

Macquarie maintained an "outperform" rating for AAPL with a price target of $117.




J.P. Morgan



With guidance between $50 billion and $53 billion for the March quarter, Apple's numbers came in 7 percent less than analyst Rod Hall had forecasted. He believes the lower than expected numbers are being driven by weaker than expected trends in the U.S. and Japan, in particular.

Another area of concern is deceleration in China. Though Apple still grew sales 14 percent year over year, it was not at the same torrid pace as before, when the company saw a 99 percent year over year increase in the prior quarter.

Bright spots noted by Hall included Apple's "very large services business," as well as a stronger-than-expected $690 average selling price of the iPhone.

J.P. Morgan has also maintained its "overweight" rating for AAPL, though the firm did slightly reduce its price target, from $145 to $141.

Cowen and Company



While Apple's guidance for the March quarter was not strong, analyst Timothy Arcuri noted the numbers were not as bad as some had feared they could be. To him, Apple's hardest comparison is now "on the tape."

Arcuri views AAPL stock as a "safe investment at this price," he said in a note issued on Wednesday. Still, he cautioned that Apple is in a "period of transition," awaiting either a new product cycle or entrance into an entirely new market.

Arcuri isn't as bullish on Apple as others, however. He maintained a "market perform" rating for the stock, with a price target of $125.




UBS



In its earnings call on Tuesday, Apple chose to emphasize its services businesses. But analyst Steven Milunovich noted that Apple continues to believe that it can grow iPhone units for years to come, based on feature differentiation and emerging market opportunities.

Milunovich also highlighted that Cook said iPhone units would not decrease as much in the March quarter as some investors are projecting. To him, that means Wall Street estimates are probably too high on the iPad and other product lines.

For the March quarter, Milunovich is forecasting sales of 52 million iPhones, which would be a 15 percent year over year decrease. He expects Apple will ship 215 million iPhones in fiscal 2016, which would be a 7 percent decline.

UBS has maintained a "buy" rating for AAPL, but cut its price target on the stock from $130 to $120.




Wells Fargo Securities



Like some others, analyst Maynard Um came away with some hope from Apple's March quarter guidance, saying the numbers imply the company's performance will be better than some Wall Street bears have suggested.

Um expects iPhone units for the quarter to be in the low-to-mid 50 million range. He said some investor expectations had dipped as low as the mid-to-high 40 million range.

Still, revenue guide for the March quarter between $50 billion and $53 billion was below his expectations of $56.7 billion, and Wall Street consensus of $55.6 billion. Apple's guided gross margins are also between 39 and 39.5 percent, which is lower than Wall Street consensus of 40 percent.

Wells Fargo Securities continues to rate shares of AAPL to "outperform," with a "valuation range" between $120 and $130.
«13456

Comments

  • Reply 1 of 117
    slurpyslurpy Posts: 5,034member
    Is this what analysts/investors focus on? The next 3 months? Explains why that industry is so fucked, with absolutely no vision and long term agenda.
    argonautlord amhranericthehalfbeecalifotoformatpropodavidthinkerpscooter63boriscletomuppetry
  • Reply 2 of 117
    The analysts all seem reasonable here. Cook did well with the messaging overall, I think. 
    singularitycnocbuilatifbpanantksundaramdelreyjonesthebmtjackansi
  • Reply 3 of 117
    sog35 said:
    slurpy said:
    Is this what analysts/investors focus on? The next 3 months? Explains why that industry is so fucked, with absolutely no vision and long term agenda.
    And who's fault is that?

    Did Tim Cook give us guidance for revenue for the rest of 2016?
    Did he give us guidance for 2017?
    Did he gives us guidance regarding what the install base will be in 3 years, 5 years, and 10 years?
    Did he give us guidance for what he expects service revenue (the next growth product) to be in the next 3 years?

    NO.

    Or course Wall Street only looks 3 months ahead. Because that's all Tim Cook will talk about in solid terms.  He is too secretive about the future so Wall Street does not give them any credit for the future.

    This goes back to what I've been saying for YEARS.  Tim Cook has no vision. Or he does but does not articulate it clearly to Wall Street. Wall Street sees Apple simply as a hardware company. Yesterday was the first time Apple even tried to hint at services being a massive part of Apple in the future. $30 billion in services is massive for 2015. Yet I don't see a single headline talking about that. Sad.  The reason is he should have been pushing the install base/services/monitize install base theme YEARS AGO. Now it looks like a desperate move.

    Stock has lost $30 billion today. Total lost is over $250 billion since last year.  We could easily see $80 stock price in a few days. All because Apple is run by a CEO who has no idea how to control the narrative of the company.

    Some people think the earth is flat or the US didn't land on the moon. Explaining things to these people doesn't work because they won't see reason. So why should Tim waste his time with the financial market equivalent?
    lord amhranfotoformatflaneurboriscletomuppetrythebmt
  • Reply 4 of 117
    I think Apple still has a messaging issue. It's kind of weird seeing this abrupt transition to talking about install base and services. Just a couple months ago it was all about iPad Pro yet iPad Pro was barely mentioned yesterday. That 60 Minutes profile in December didn't focus on software or services at all yet now that's how Tim and Luca want us to view the company. Without an actual services story to tell this seems a bit desperate, sort of like the iPhone story isn't so great right now so let's pivot to services instead. I think it comes across as confusing and maybe a bit dingenuous. Tim and Luca gave no insight on monitization of the user base. They just threw out a supplemental slide with services revenue, most of which is probably App Store and iTunes sales. 

    If Apple is now going to switch the focus to services and monetizing the user base then they need someone better than Eddy Cue to drive that initiative. His organization is the weakest inside Apple IMO and all we'v3 gotten from him is the stupid Beats purchase and a me-zoo streaming music service that tries to do way to much and doesn't end up doing any of it great. Another thing, there's nothing sexy about "monetizing the user base". As a product company first and foremost, how does Apple keep up the excitement level transitioning to a "services" company?
    jasenj1bobschlobanantksundarampotatoleeksoupsensipatchythepirate
  • Reply 5 of 117
    rob53rob53 Posts: 1,912member
    sog35 said:
    And who's fault is that?

    Did Tim Cook give us guidance for revenue for the rest of 2016?
    Did he give us guidance for 2017?
    Did he gives us guidance regarding what the install base will be in 3 years, 5 years, and 10 years?
    Did he give us guidance for what he expects service revenue (the next growth product) to be in the next 3 years?

    NO.

    Or course Wall Street only looks 3 months ahead. Because that's all Tim Cook will talk about in solid terms.  He is too secretive about the future so Wall Street does not give them any credit for the future.

    This goes back to what I've been saying for YEARS.  Tim Cook has no vision. Or he does but does not articulate it clearly to Wall Street. Wall Street sees Apple simply as a hardware company. Yesterday was the first time Apple even tried to hint at services being a massive part of Apple in the future. $30 billion in services is massive for 2015. Yet I don't see a single headline talking about that. Sad.  The reason is he should have been pushing the install base/services/monitize install base theme YEARS AGO. Now it looks like a desperate move.

    Stock has lost $30 billion today. Total lost is over $250 billion since last year.  We could easily see $80 stock price in a few days. All because Apple is run by a CEO who has no idea how to control the narrative of the company.

    Some people think the earth is flat or the US didn't land on the moon. Explaining things to these people doesn't work because they won't see reason. So why should Tim waste his time with the financial market equivalent?
    You're absolutely correct! Of course, people who know the US landed on the moon and that the earth is round also understand that Apple is doing just fine. It's AAPL that sucks, which seems to be all people care about. Apple hasn't lost any money, they continue to make millions. Stock traders are the ones who are losing money, except, of course for the traders who make money on every trade.
    nolamacguyfotoformatboriscleto
  • Reply 6 of 117
    slurpy said:
    Is this what analysts/investors focus on? The next 3 months? Explains why that industry is so fucked, with absolutely no vision and long term agenda.
    For the most part, companies like Apple, Google, and Amazon think long term. Wall Street thinks short term. That is the whole point of the article. Quarterly earnings. Three months is a quarter. This is how Wall Street looks at every company. 
    mike1lito_lupena
  • Reply 7 of 117
    ibillibill Posts: 391member
    In my view, Steve Jobs did no better with managing Wall Street expectations, perhaps not even as good as Tim Cook is doing now.
    thebmt
  • Reply 8 of 117
    I do think this will put pressure on Tim -- or the Apple Board-of-Directors -- to take a more active role in protecting shareholder value.

    I listened to the call, am a supporter of Tim, and think that Apple is doing great things in many aspects (R&D, Sales, Profit).  And yet... any public company has an important reponsibility to protect its owners (i.e., shareholders), and that has fallen down recently.  Without meaning to spark the vitriol that often comes on this site, I do think "protecting shareholder value" is a legitimate topic..
    teejay2012calibobschlobanantksundarampotatoleeksoupjax44palomine
  • Reply 9 of 117
    mj webmj web Posts: 918member
    You don't need a crystal ball to predict Apple's product cycles.... Macs Q2, iPhones Q3, etc. What has totally disappeared from the Apple picture is disruptive surprises. I found nothing about Beats, the Watch, or Music, mildly compelling. For the last 10 years, I was, demographically, Apple's target customer. How can kids buying blue earphones and $1.29 songs replace customers buying $4000 iMacs and $1000 iPads? Something doesn't compute. As I repeated numerous times throughout 2015, I don't think Apple (or Tim Cook/Jony Ive) executed terribly well. Better luck this year!
    edited January 2016 6Sgoldfishbobschlobanantksundaram
  • Reply 10 of 117
    The analysts all seem reasonable here. Cook did well with the messaging overall, I think. 
    I'm not sure I agree. That supplemental services slide seemed a bit desperate to me, sort of like, hey we don't have an iPhone or iPad story to tell so let's pivot to services (even if the bulk of that services number is App Store and iTunes purchases). Also the comments about China don't really jive with what Tim said to Jim Cramer back in November.  So either China in December and January totally took Tim and Luca by surprise or what Tim said back in November wasn't completely genuine.
  • Reply 11 of 117
    I do think this will put pressure on Tim -- or the Apple Board-of-Directors -- to take a more active role in protecting shareholder value.

    I listened to the call, am a supporter of Tim, and think that Apple is doing great things in many aspects (R&D, Sales, Profit).  And yet... any public company has an important reponsibility to protect its owners (i.e., shareholders), and that has fallen down recently.  Without meaning to spark the vitriol that often comes on this site, I do think "protecting shareholder value" is a legitimate topic..
    while I agree, Apple's product line is very much a bellweather for the general economy.  Apple grows 'down' and if the general public are going to be tightening belts, Apple will be hit.  

    The problem with protecting value is that most companies do it wrong (cut R&D, decrease quality, and inferred by the analysts... focus on the short term).  I'm hoping apple focuses on the long term, and to be honest, doesn't see propping shareholder value in a weak global economy as job 1 (getting 2% a year in dividends is a decent return in this economy).
    cali
  • Reply 12 of 117
    I do think this will put pressure on Tim -- or the Apple Board-of-Directors -- to take a more active role in protecting shareholder value.

    I listened to the call, am a supporter of Tim, and think that Apple is doing great things in many aspects (R&D, Sales, Profit).  And yet... any public company has an important reponsibility to protect its owners (i.e., shareholders), and that has fallen down recently.  Without meaning to spark the vitriol that often comes on this site, I do think "protecting shareholder value" is a legitimate topic..
    while I agree, Apple's product line is very much a bellweather for the general economy.  Apple grows 'down' and if the general public are going to be tightening belts, Apple will be hit.  

    The problem with protecting value is that most companies do it wrong (cut R&D, decrease quality, and inferred by the analysts... focus on the short term).  I'm hoping apple focuses on the long term, and to be honest, doesn't see propping shareholder value in a weak global economy as job 1 (getting 2% a year in dividends is a decent return in this economy).
    Apple's been here before.   Last time, Jobs said they would take the opportunity to invest in research, etc., and they did with a fabulous payoff.  It's a good enough model for the current situation.

    http://archive.fortune.com/galleries/2008/fortune/0803/gallery.jobsqna.fortune/15.html
    califastasleep
  • Reply 13 of 117
    The analysts all seem reasonable here. Cook did well with the messaging overall, I think. 
    I think Cook did reasonably well, but could have put the 2014 holiday quarter into perspective a little better, as I don't see the slowdown in iPhone sales as real as it's being made out to be. The 2014 holiday season, included sales from the first large screen iPhones, and was a monster quarter and could be understood to be an unusual situation. One of the points Cook made was how next quarters year over year comps (YOY) were going to be most challenging as the 2015 2nd quarter sales included iPhones delayed due to production constraints - these would have normally been fallen in the 2014 holiday period. This, would have made the 2014 holiday season even higher, resulting in a YOY miss for this last holiday season, but the 2nd quarter YOY would be in better shape. I think a miss in the holiday quarter is easier to understand when factoring in the introduction of the first large screen iPhones.
    cali
  • Reply 14 of 117

    sog35 said:
    slurpy said:
    Is this what analysts/investors focus on? The next 3 months? Explains why that industry is so fucked, with absolutely no vision and long term agenda.
    And who's fault is that?

    Did Tim Cook give us guidance for revenue for the rest of 2016?
    Did he give us guidance for 2017?
    Did he gives us guidance regarding what the install base will be in 3 years, 5 years, and 10 years?
    Did he give us guidance for what he expects service revenue (the next growth product) to be in the next 3 years?

    NO.

    Or course Wall Street only looks 3 months ahead. Because that's all Tim Cook will talk about in solid terms.  He is too secretive about the future so Wall Street does not give them any credit for the future.

    This goes back to what I've been saying for YEARS.  Tim Cook has no vision. Or he does but does not articulate it clearly to Wall Street. Wall Street sees Apple simply as a hardware company. Yesterday was the first time Apple even tried to hint at services being a massive part of Apple in the future. $30 billion in services is massive for 2015. Yet I don't see a single headline talking about that. Sad.  The reason is he should have been pushing the install base/services/monitize install base theme YEARS AGO. Now it looks like a desperate move.

    Stock has lost $30 billion today. Total lost is over $250 billion since last year.  We could easily see $80 stock price in a few days. All because Apple is run by a CEO who has no idea how to control the narrative of the company.

    You sound foolish.  It's hard enough to give good guidance for the next quarter, let alone for a year or next year.  As a slave to guidance, I would expect you to be more sensitive about that. Should Apple have given guidance about this year's iphone installed base in 2006?  You have any idea how stupid that sounds?  Do you think Apple should have provided downward guidance for Q3 2016 LAST YEAR?  Wall Street looks 3 months ahead because that's the next time they get meaningful information.  If Cook gives guidance 3 years ahead they will be wildly off one direction or another.  You think Wall Street likes that?  You are a horrible armchair CEO.
    nolamacguycalimdriftmeyerpropodflaneurfastasleep
  • Reply 15 of 117
    sog35 said:
    ibill said:
    In my view, Steve Jobs did no better with managing Wall Street expectations, perhaps not even as good as Tim Cook is doing now.
    I disagree. 

    Steve Jobs did not have prolonged periods of Apple having a 10-12 PE.
    Apple was never this ridiculously under valued like how it was from 2013-2014 and now.
    Apple didn't have 200+ billion in unaccessible cash either. That's messing with the stock. 
  • Reply 16 of 117
    thomprthompr Posts: 1,510member
    williamh said:

    sog35 said:
    And who's fault is that?

    Did Tim Cook give us guidance for revenue for the rest of 2016?
    Did he give us guidance for 2017?
    Did he gives us guidance regarding what the install base will be in 3 years, 5 years, and 10 years?
    Did he give us guidance for what he expects service revenue (the next growth product) to be in the next 3 years?

    NO.

    Or course Wall Street only looks 3 months ahead. Because that's all Tim Cook will talk about in solid terms.  He is too secretive about the future so Wall Street does not give them any credit for the future.

    This goes back to what I've been saying for YEARS.  Tim Cook has no vision. Or he does but does not articulate it clearly to Wall Street. Wall Street sees Apple simply as a hardware company. Yesterday was the first time Apple even tried to hint at services being a massive part of Apple in the future. $30 billion in services is massive for 2015. Yet I don't see a single headline talking about that. Sad.  The reason is he should have been pushing the install base/services/monitize install base theme YEARS AGO. Now it looks like a desperate move.

    Stock has lost $30 billion today. Total lost is over $250 billion since last year.  We could easily see $80 stock price in a few days. All because Apple is run by a CEO who has no idea how to control the narrative of the company.

    You sound foolish.  It's hard enough to give good guidance for the next quarter, let alone for a year or next year.  As a slave to guidance, I would expect you to be more sensitive about that. Should Apple have given guidance about this year's iphone installed base in 2006?  You have any idea how stupid that sounds?  Do you think Apple should have provided downward guidance for Q3 2016 LAST YEAR?  Wall Street looks 3 months ahead because that's the next time they get meaningful information.  If Cook gives guidance 3 years ahead they will be wildly off one direction or another.  You think Wall Street likes that?  You are a horrible armchair CEO.
    You are exactly right.   Sog is a horrible armchair CEO, very immature and very impatient.

    If he is so up on what will happen with revenue for the rest of 2016 (or even 2017, ha!) then he should view the undervalued AAPL shares as a buying opportunity. 


    nolamacguyfastasleep
  • Reply 17 of 117
    steviestevie Posts: 956member
    Wall Street doesn't understand Apple, so Wall Street hates Apple.

    Never mind that Apple has funneled BILLIONS of dollars from people's pockets directly into Wall Street's grubby little hands.  Never mind that Apple is poised to give even MORE money to Wall Street.

    It is never enough for them.  Apple just gives and gives to Wall Street, every quarter, year in and year out.  But they want Apple to sell more, not less.  Go figure.
  • Reply 18 of 117
    BTW on the conference call Cook said the install base grew by 25% but services revenue only grew by 15%. I'm skeptical about pivot to services. Where is it going to come from? Apple has been pretty clear on what it thinks about advertising. And I doubt they're going to move to a software as a service model when they've made most of their software free. So where does this services revenue come from? Does Apple buy Netflix or start creating their own content to compete with Netflix? That would be very expensive and Apple would no longer be a neutral platform, they'd be in competition with exact content creators/companies they want on their platform. I'm just not sure how Apple successfully pivots away from products (devices) to services, especially when it's never been their core competency.
  • Reply 19 of 117
    bugsnwbugsnw Posts: 707member
    On this next product cycle for iPhones (7) and updated laptops, I echo a previous commenters wish that they are sexy as hell. Pull out the stops. 256G storage options, huge flash drives in laptops, upgrade free iCloud allotment, max out the CPUs....do something to really surprise wall street and main street.

    Right now, and for a long time, it appears that Apple is sort of coasting. I can't put my finger on it. I know there's the iPad pro, but I almost walked past it at Costco. It looks like an oversize iPad. Nothing about it said WOW!!!!! Not even the screen.

    It's just my gut feeling. This can be fixed by really pushing the industry hard. If we see anything from Apple that says 16G, I'm going to throw up right on my tv.

    As far as Wall Street....can't just ignore them. Tim Cook is not the legendary visionary who founded Apple and sees into the future. He has to work that much harder. In fact, he's sort of a plain jane. I like him as CEO, but maybe he needs to ramp up his mojo. Talk up Apple, at least. Give Wall Street a sneak peak at something. I dunno. At least Steve Jobs addressed his return and the economic slump that was before him, "Apple is going to INNOVATE our way out of this!" and of course that was followed shortly by massive innovation and change.

    This can turn around quickly. But the iPhone 7 cannot look anything like the iPhone 6. Wall street is superficial and will respond to shiny objects. Apple can engineer something really cool that screams NEW!!!!! while being just as innovative and beautiful as the 6s were. Last time, every component in the iPhone was overhauled. Except the outside. Now it's time to dazzle. Same with iOS and OS X. X needs a facelift. Someone take away Ive's white crayon. There is a LOT in the interface that needs polish and rethinking.

    If Apple attacks from all fronts - hardware, software, design, engineering, cool, sexy, etc - they can turn around the perception that they've stopped innovating and possibly turn around Wall Street's notion that the king is dead and Apple will likely head into a gradual decline. Sales will be great (like Microsoft), but lack of true innovation will eventually sink it (Microsoft).

    Apple... surprise all of us. Pull out the stops.
  • Reply 20 of 117
    sog35 said:

    1. Streaming movies - like Netflix
    2. LiveTV subs
    3. Home automation/home security
    4. Social platform
    5. Uber-like taxi service (using Apple Cars?)
    6. Search + ads
    7. Expand leasing to iPad, Mac, and Watch
    8. Video sharing like Youtube
    9. Banking, creditcards, 
    Search + Ads? WTF are you smoking. Apple has just about shutdown iAds. Ads are for Google and they rightly get blocked at my router (as does 100+ MS domains). IMHO, Ads are a plague and one way Apple can differentiate itself is NOT to offer Ads.
    Offering Streaming services is nothing more than a MeToo. It will probably make money but it won't make Apple stand out from the crowd.
    As for Banking etc, that would need a totally separate company in many parts of the world.
    The US Banking industry is really backward. Unless Apple can come in and really shake it up (and let a lot of small regional banks go to the wall) it should be a non-starter. State laws make a truly Nationwide bank a real hard thing to setup. The simple act of moving some money from one state to another can end you up in Jail if you don't do it right. That is plain crazy and until the Banking system in the US is totally refomed APPLE should stay well out of it.

    You have to have take a world view with Apple not a US centric one.

    nolamacguy
Sign In or Register to comment.