ML downgrades Apple on fears of declining growth
While acknowledging that Apple's execution has been "extraordinary," Merrill Lynch on Wednesday downgraded the company's stock from "Buy" to "Neutral," saying it sees more limited upside from this point forth.
After analyzing the Apple's 2007 earnings scenarios, Merrill Lynch found Apple stock to be fairly valued at its current $50 to $60 range. The firm also believes Apple's revenue growth will begin to slow within the next 1 to 3 fiscal quarters.
"We believe iPod penetration into the consumer PC installed base can go higher than the current estimated 16% but worry the stock appears to be pricing in penetration closer to 40% around 2007" analyst Richard Farmer wrote in a research note obtained by AppleInsider. He believes this figure to be reasonable but unlikely to be exceeded.
Farmer also waved caution at the upcoming Intel transition and launch of Microsoft's Vista operating system, two events that could possible hold back buyers and prevent Mac market share gains.
"When everyone knows everything is going right for a company, sentiment is hard to improve," wrote Farmer.
The downgrade on Apple is the first in many months, as the iPod maker's stock has recently become a Wall Street favorite, trading at all-time highs.
Shares of Apple traded down some 4.42% or $2.36 this afternoon to close at $51.08.
After analyzing the Apple's 2007 earnings scenarios, Merrill Lynch found Apple stock to be fairly valued at its current $50 to $60 range. The firm also believes Apple's revenue growth will begin to slow within the next 1 to 3 fiscal quarters.
"We believe iPod penetration into the consumer PC installed base can go higher than the current estimated 16% but worry the stock appears to be pricing in penetration closer to 40% around 2007" analyst Richard Farmer wrote in a research note obtained by AppleInsider. He believes this figure to be reasonable but unlikely to be exceeded.
Farmer also waved caution at the upcoming Intel transition and launch of Microsoft's Vista operating system, two events that could possible hold back buyers and prevent Mac market share gains.
"When everyone knows everything is going right for a company, sentiment is hard to improve," wrote Farmer.
The downgrade on Apple is the first in many months, as the iPod maker's stock has recently become a Wall Street favorite, trading at all-time highs.
Shares of Apple traded down some 4.42% or $2.36 this afternoon to close at $51.08.
Comments
The Intel transition will only help Apple's market share. Early reactions to Vista are a giant BFD. It's well-known that Vista is not much different from XP and is still plagued by The Registry, the playground of malware authors.
And as the buyers of new iPods levels off, veteran iPod owners will be buying replacement iPods, whether it is because their first ones broke or they like the new features on new models.
Stupid shallow analysis. Richard Farmer ought to pay attention to his name and hop on a tractor instead of slandering Apple.
Notice what ML is saying is that the current stock price reflects a very optimistic picture of Apples situation in 2007. To justify a higher stock price Apple has to exceed this optimism (the 40% figure for the iPod). And the stock is still in its low 50s. ML is predicting a growth up to the high 50s.
Originally posted by macFanDave
Idiot!
The Intel transition will only help Apple's market share. Early reactions to Vista are a giant BFD. It's well-known that Vista is not much different from XP and is still plagued by The Registry, the playground of malware authors.
And as the buyers of new iPods levels off, veteran iPod owners will be buying replacement iPods, whether it is because their first ones broke or they like the new features on new models.
Stupid shallow analysis. Richard Farmer ought to pay attention to his name and hop on a tractor instead of slandering Apple.
A little harsh perhaps.
Many, many people will buy Vista.
Many, many people will rave about Vista.
Whether it's amazing or atrocious it will get big sales.
And (hopefully temporarily) everyone(i.e. general population) will be wanting it.
It will have an effect. Hopefully not for long.
Also they changed to 'neutral', not to 'sell'.
I bought an eMac 3 years ago. If I had spent the money on shares i'd have almost quadrupled my money if not better.
They can't keep going at the same rate. We've seen all the 'fantastic' growth we're gonna get for a while.
If you haven't invested in Apple by now I wouldn't recommend it.
Geek knowledge does not always convert to sound financial practice.
Also, if these guys really knew which way things were going they would be trading independantly on their own account rather than working for someone else.
The people surfing these boards know just as much about Apple, if not more than, the majority of the analysts. Their views should be taken with a pinch of salt.
Originally posted by Gates_of_Hell
You can never really trust analysts as they are there to help the financial institutions they work for, not Joe Public. They are not truly independant. How do we know that their company is not loading up on Apple stock as they talk the price down?
Also, if these guys really knew which way things were going they would be trading independantly on their own account rather than working for someone else.
The people surfing these boards know just as much about Apple, if not more than, the majority of the analysts. Their views should be taken with a pinch of salt.
Geek knowledge is not the same as good financial practice.
Farmer said nothing bad about Apple.
He merely said that now is the time to pay attention.
He is repsonsible for investing other people's money.
He may be plowing his own money into Apple but he has to say what is best for his customers. How do you know that he isn't trading on his own account? Many large financial istitutions require their analysts and fund managers to invest their own money in the same stocks/issues as they recommend.
As for the following..
The people surfing these boards know just as much about Apple, if not more than, the majority of the analysts. Their views should be taken with a pinch of salt.
... you can't really believe that???
Financial analysts don't sit at their computer a read forums about companies. They spend weeks on end reasearching their investments. They spend hours talking to the company and it's employees. They know a hell of a lot more than the the people that surf these boards.
Of course they make mistakes from time to time, but don't criticise something you don't understand.
Would intially recommend www.wikipedia.com for a little research into the following key words: Stocks, Companies, Shares, Share dealing, Investment, Investemnt houses etc.
Originally posted by Gates_of_Hell
The people surfing these boards know just as much about Apple, if not more than, the majority of the analysts. Their views should be taken with a pinch of salt.
The people here will be blind fanboys as long as things are ding-dong at Apple.
Look at the arguments by the analyst and the result of it and tell me - point by point - where he gets it wrong.
Originally posted by Anders
The people here will be blind fanboys as long as things are ding-dong at Apple.
Look at the arguments by the analyst and the result of it and tell me - point by point - where he gets it wrong.
Well said!!!
Maybe not 'blind fanboys', just way out of their subject.
The Intel transition is a huge gamble. If it pays off, Apple's market share could go to 25% or 30% - that's gigantic growth.
-- begin Apple fanboy opinion --
As an Apple fanboy, my expectation is that that will succeed. But I do recognize that buying Apple stock on those grounds is very risky. I also think that Vista will not be all that successful; each of MS's OS iterations has had less upgrade uptake than the last - people mostly only buy MS's OSs when they're preloaded. Very few people upgraded from 98 or 2000 to XP, and few people bought a new machine to get XP. Whether Vista will improve that depends on whether people perceive sufficient value in it, and my opinion is they won't: they'll see it as DRM-heavy, crushingly expensive, slow, bloated and buggy. Besides, it will still be late. We won't see it in 2006.
-- end Apple fanboy opinion --
(edit) one thing certain about Vista: It won't run a lot of older code, and device drivers will be hard to find, so that will also limit upgrading.
As for the following..
The people surfing these boards know just as much about Apple, if not more than, the majority of the analysts. Their views should be taken with a pinch of salt.
... you can't really believe that???
Financial analysts don't sit at their computer a read forums about companies. They spend weeks on end reasearching their investments. They spend hours talking to the company and it's employees. They know a hell of a lot more than the the people that surf these boards.
GatesOfHell is right. I've been investing in Apple since 1997 and MOST of the time, I went against the analysts' opinions and have made lots of money doing it. I don't know about the majority of the people on these boards, but I do know that I am MUCH smarter about Apple than any analyst and I have a track record to prove it. One problem is that analysts have to cover entire sectors, but I only care about Apple. If one of these firms wanted to hire me to research Apple and nothing else, I am available.
But, Lincoln, do not be overawed by the pretty talk of financial analysts. Historically, their wisdom has proven no more effective at picking stocks than throwing darts at the financial pages. All they are doing is an elaborate CYA (cover your ass) maneuver. Suppose you are a pension fund manager and the analysts are touting XYZ Corp and you buy a few million shares. Then, in a few months, it tanks. When you have to face the board, you can show them all of the analyst reports which is better than saying that it was where my dart landed.
Originally posted by macFanDave
... you can't really believe that???
Financial analysts don't sit at their computer a read forums about companies. They spend weeks on end reasearching their investments. They spend hours talking to the company and it's employees. They know a hell of a lot more than the the people that surf these boards.
GatesOfHell is right. I've been investing in Apple since 1997 and MOST of the time, I went against the analysts' opinions and have made lots of money doing it. I don't know about the majority of the people on these boards, but I do know that I am MUCH smarter about Apple than any analyst and I have a track record to prove it. One problem is that analysts have to cover entire sectors, but I only care about Apple. If one of these firms wanted to hire me to research Apple and nothing else, I am available.
But, Lincoln, do not be overawed by the pretty talk of financial analysts. Historically, their wisdom has proven no more effective at picking stocks than throwing darts at the financial pages. All they are doing is an elaborate CYA (cover your ass) maneuver. Suppose you are a pension fund manager and the analysts are touting XYZ Corp and you buy a few million shares. Then, in a few months, it tanks. When you have to face the board, you can show them all of the analyst reports which is better than saying that it was where my dart landed. [/QUOTE]
All those words and still haven´t looked at Farmers arguments.
Originally posted by macFanDave
Do not be overawed by the pretty talk of financial analysts. Historically, their wisdom has proven no more effective at picking stocks than throwing darts at the financial pages. All they are doing is an elaborate CYA (cover your ass) maneuver.
You really have a hard-on for Farmer don't you.
Merril Lynch doesn't have a net revenue of $22 billion by asking Fanboys where to spend their money. 'Pretty talk of financial analysts' this is not. All he is saying is that now is not the time to put money into Apple. It's a warning to people. The people who have seen the rise of Apple over the past few years might finally get of their ass and buy some shares... and that would be a bad idea. If all you hear is 'massive growth', then you've already missed the boat.
I suppose you would also recommend: Berkshire Hathaway, Quiksilver, McDonalds, Microsoft, Nokia etc.... Sorry, You've missed the moneymakin'.
Originally posted by Anders
The people here will be blind fanboys as long as things are ding-dong at Apple.
Look at the arguments by the analyst and the result of it and tell me - point by point - where he gets it wrong.
OK here is one
''Farmer also waved caution at the upcoming Intel transition and launch of Microsoft's Vista operating system, two events that could possible hold back buyers and prevent Mac market share gains.''
This is the ''glass half empty'' view. why would it hold back buyers? There will be a major push by all computer manufacturers to push their new iron . Apple will have Leopard. if MS gets Vista out the door by this time next year every tech columnist will be COMPARING Apple's Leopard to Window's Vista . It will be upgrade time and the cosumer can consider this: You can get the new Dell with Windows Vista or a New Mac with the superior OS of Tiger or Leopard plus Windows.
Assuming the price points are not wider than they are at the moment then it is reasonable to assume Apple will INCREASE market share.
His timing of the release was to say the least questionable. big down day with heavy volume of Apple share because of the NANO problems. The stock starts to recover and this guy drops ML rating causing the stock to drop further. Too bad ML lost Steve Mulonovitch who did channel checks etc AND BACKED UP HIS OPINIONS WITH FACTS. I see no explicit numbers in Farmer's take. ''iPods with 40% of PC installed base'' How much is that and who said it?
Originally posted by snipe
His timing of the release was to say the least questionable. big down day with heavy volume of Apple share because of the NANO problems. The stock starts to recover and this guy drops ML rating causing the stock to drop further.
It's just the short term investors that are bothered by things like this. Everyone should have held their stock, like Farmer recommended!!
The stock has I beleive recovered(last time i checked).
I'm starting to feel as if I'm an apologist for anyone who wants to make money from investing. I'm not a complete capitalist even if I'm starting to sound like one.
Originally posted by Lincolnrozelle
Geek knowledge is not the same as good financial practice.
Farmer said nothing bad about Apple.
He merely said that now is the time to pay attention.
He is repsonsible for investing other people's money.
He may be plowing his own money into Apple but he has to say what is best for his customers. How do you know that he isn't trading on his own account? Many large financial istitutions require their analysts and fund managers to invest their own money in the same stocks/issues as they recommend.
As for the following..
... you can't really believe that???
Financial analysts don't sit at their computer a read forums about companies. They spend weeks on end reasearching their investments. They spend hours talking to the company and it's employees. They know a hell of a lot more than the the people that surf these boards.
Of course they make mistakes from time to time, but don't criticise something you don't understand.
Would intially recommend www.wikipedia.com for a little research into the following key words: Stocks, Companies, Shares, Share dealing, Investment, Investemnt houses etc.
I have actually worked in a number of financial institutions in the City of London and probably know more about finance and investments than you ever will. I rub shoulders with the sorts of people who make these predictions and all they can ever come up with is a best guess based on their research. That does not mean that their conclusions are correct.
I guess you've never heard of Jim Slater's Zulu Principle (go look it up, Wiki-boy). Someone with a keen interest in anything can soon become an expert in it with a little effort. It's on such knowledge that sound investment decisions are made. People that follow these boards are likely to suck up a lot of info related to Apple and they probably know better how well their local Apple Store is faring than an analyst simply because they hang out there a lot more.
As consumers of Apple products we instinctively know whether a new product is a hit or miss.
FWIW I'm currently making a lot of money simply trading Apple shares - a lot more than any fund I've ever bought into. So laugh as much as you like, while I count my cash.
Originally posted by Gates_of_Hell
I have actually worked in a number of financial institutions in the City of London and probably know more about finance and investments than you ever will. I rub shoulders with the sorts of people who make these predictions and all they can ever come up with is a best guess based on their research. That does not mean that their conclusions are correct.
I guess you've never heard of Jim Slater's Zulu Principle (go look it up, Wiki-boy). Someone with a keen interest in anything can soon become an expert in it with a little effort. It's on such knowledge that sound investment decisions are made. People that follow these boards are likely to suck up a lot of info related to Apple and they probably know better how well their local Apple Store is faring than an analyst simply because they hang out there a lot more.
As consumers of Apple products we instinctively know whether a new product is a hit or miss.
FWIW I'm currently making a lot of money simply trading Apple shares - a lot more than any fund I've ever bought into. So laugh as much as you like, while I count my cash.
ANd yet you don´t show where he goes wrong exactly.
Originally posted by Gates_of_Hell
So laugh as much as you like, while I count my cash.
I am. Enjoy your cash. Have great weekend.
Originally posted by Anders
All those words and still haven?t looked at Farmers arguments.
Look at the first post in this thread, you stupid fuck!
I specifically address all of Farmer's arguments. When "due diligence" is limited to looking at an 18-post thread, you've got to be pretty lazy to not do it.
Originally posted by macFanDave
Idiot!
The Intel transition will only help Apple's market share. Early reactions to Vista are a giant BFD. It's well-known that Vista is not much different from XP and is still plagued by The Registry, the playground of malware authors.
And as the buyers of new iPods levels off, veteran iPod owners will be buying replacement iPods, whether it is because their first ones broke or they like the new features on new models.
Yeah, how dare an analyst say bad things about apple. Bad analyst! Bad!
Oh, and how does early reactions to Vista help Apple? People will just stay with their current OS/computer. They aren't likely to just dump the whole thing to go mac just because Vista is a yawner.
Plus, this whole "People can get a Mac AND windows with a new Macintel system" thing sounds great, except (a) Apple isn't selling the computer with Windows, and (b) they aren't going to support running windows on the computer. Thus, you'd have to spend more money on the computer (because Apple always charges more), then spend more money on Windows XP so you can run all your apps that buying a PC would've gotten you anyway. Plus, most users don't want to dual-boot. They don't want to go "Hey, I'm working in Word, but want to edit a movie, let me close everything down, restart, select "Run OS X" from some menu, start up iMovie, do some work, then realize I need to edit my word document, so close everything down, reboot, fire up windows, etc.
Plus, if its running windows, then the Mac will get infected with Malmare (not OS X, but the computer itself), and people will say "See, even macs get viruses and things", because most people don't differentiate the computer from the OS. Its all in the same for them.