Citigroup upgrades Apple on Tuesday's weakness

Posted:
in General Discussion edited January 2014
Citing yesterday's sharp pullback in share price, Citigroup on Wednesday upgraded shares of Apple from Hold to Buy and suggested that investors take advantage of present weakness to build their positions in the company.



"We see worst-case near-term downside to $115, but view the probability of a pull back to these levels as low," lead analyst Rich Gardner wrote in a research note. "With upside to $160, we would increase positions at current levels and simply use any near-term weakness to buy more shares."



Gardner noted that Apple shares declined some 6.8 percent or almost $10 Tuesday following rumblings of iPod and iPhone production cuts in Asia, but said the Street shouldn't have been alarmed by such cuts.



"iPod production cuts reflect normal channel inventory drawdown ahead of new product introductions in August or September," he explained. "More specifically, we expect higher-capacity Shuffles and nanos with lower price/GB, as well as a video iPod with an iPhone-like 3.5-inch diagonal screen and touch-screen controls."



Gardner also said at least one of the new video iPod models could use NAND flash memory instead of a 1.8-inch hard disk drive. While the move would undoubtedly cut into Apple's iPod margins, the analyst said his current estimates already factor in the shift.



On the other hand, Gardner said the rumored iPhone production cuts would reflect a return to more-reasonable estimates after very aggressive initial estimates from Apple to suppliers before the product's launch in June.



"We note that our estimate and consensus was 3.0 million iPhone units for 2007 before Tuesday’s talk of a reduction in build plan from 7 to 8 million units to around 4 million units," he wrote. "In our view, lower price points, 3G, and broader geographic distribution will be required before Apple can hope to sell 7 to 8 million units in six months, so this was never a reasonable expectation."



In his note to clients, the Citigroup analyst was also quick to remind investors that virtually all of the $310 million revenue upside to his June quarter Apple estimates came from higher-than-expected Mac sales. This strength in Macs, he said, should continue for the balance of this year for several reasons:



"First, Apple ended the June quarter with Mac channel inventory of three to four weeks, one to two weeks below the company’s target range. This clearly suggests imminent product transition(s) within the Mac line," he wrote. "Indeed, Apple announced Tuesday a 'Mac-related Press Event' at the company’s headquarters on Tuesday, 7 August, which likely will yield newly-redesigned flat-panel iMacs and perhaps other new Mac-related products as well."



The continued expansion of Apple’s relationship with Best Buy should also boost Mac volumes between now and year-end, in the analyst's opinion. Apple has said that it expects to expand its Best Buy distribution from 75 stores at the end of the second calendar quarter to more than 200 stores by the end of third, and more than 300 by the end of the year.



"Simply stocking these locations could add 50-100K units to Apple’s quarterly run rate between now and year-end," he explained.



In upgrading Apple shares Wednesday, Gardner maintained his $160 price target and made no changes to his estimates.
«13

Comments

  • Reply 1 of 47
    damn it so many idiotic investors driving Apple stock down by selling. I lost 10% of value last 2 days.



    Apple stock has become almost as volatile as the junk stocks in recent months.
  • Reply 2 of 47
    mstonemstone Posts: 11,510member
    Quote:

    In our view, lower price points, 3G, and broader geographic distribution will be required before Apple can hope to sell 7 to 8 million units in six months, so this was never a reasonable expectation."



    When did Apple say that they were planning to sell 7-8 million in the next 6 months? I don't remember hearing this figure before.



    m
  • Reply 3 of 47
    Quote:
    Originally Posted by mstone View Post


    When did Apple say that they were planning to sell 7-8 million in the next 6 months? I don't remember hearing this figure before.



    m



    Apple is down again today (1.76 last I checked). I really hate anylysts! They shoot off their mouths speculating about things they really don't have no idea about. While I do agree that Apple made a big mistake partnering with AT&T and that they should have come out with both a GSM and 3G models right from the beginning, I do not agree that the price point is too high for the iPhone.



    Where the price gets heavy is when you add in the cost of AT&T's service. ANd even that isn't much more than what others are paying.



    Considering all the good news starting to stream out of Cupertino, you would think that Apple's stock would continue it rocket climb.



    Simply my opinion.
  • Reply 4 of 47
    wallywally Posts: 211member
    Quote:
    Originally Posted by mstone View Post


    When did Apple say that they were planning to sell 7-8 million in the next 6 months? I don't remember hearing this figure before.



    They never did.



    All this bull*hit is coming from click-whores like CNet/ZDnet, TheStreet.com and The Register. Even after Apple had announced they had sold 270,000 iPhones in the first 30 hours (20 hours being the actual time the stores where open for business) - these "news" sites kept belching out what "a disappointing figure" it was that Apple had sold only 146,000 iPhones (the number of phones AT&T actually activated in that 30 hours). Apple never announced a figure they were expecting to sell in the first weekend. It was the "press" that kept speculating - then when the real numbers come out - they compare the highest figure some wag pulled out his *ss to Apple's real numbers and arrive at the conclusion that "the iPhone launch was disappointing".



    I don't know. It seems there is no respectable news organization anymore - they all want sensationalist "clickable" headlines with fluff news or simply outright lies.
  • Reply 5 of 47
    They should change the name of this place from AppleInsider to wahhhhh my apple stock went down!



  • Reply 6 of 47
    buckbuck Posts: 293member
    This is all Eminem's bad karma. It spreads to Apple's stock.
  • Reply 7 of 47
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by syklee26 View Post


    damn it so many idiotic investors driving Apple stock down by selling. I lost 10% of value last 2 days.



    Apple stock has become almost as volatile as the junk stocks in recent months.



    It's still $10 higher than it was a month ago.



    The problem is that people are buying and selling on exorbitant expectations and too little information, and it doesn't help that Apple's so secretive. The analysts aren't helping either, but they can do what they do only because people seem to trust them without having a very good reason to do so. I wish I had the time and patience to record these predictions and see how well each one does.



    The volatility only seems to be that way in the last couple weeks:



    http://finance.google.com/finance?q=AAPL
  • Reply 8 of 47
    aaarrrggghaaarrrgggh Posts: 1,580member
    Quote:
    Originally Posted by syklee26 View Post


    damn it so many idiotic investors driving Apple stock down by selling. I lost 10% of value last 2 days.



    Apple stock has become almost as volatile as the junk stocks in recent months.



    Well, it's all in how you look at it. I see it as a fantastic buying opportunity, with 15% upside in the short term and 25% over the course of a couple months. (And I lost two months salary over the past two day... on paper, anyway.)



    BTW, it has always been extremely volatile with AAPL. These huge swings are a little odd, but not uncommon after quarterly results.



    One last thing... this analyst gets the most important thing for Apple right now-- Mac unit sales growth! This has the best long-term opportunity for Apple, as it gets people into the brand. New product lines are valued higher because they bring in brand-new revenue streams, but core business is what shows long-term strength.
  • Reply 9 of 47
    dentondenton Posts: 725member
    Quote:
    Originally Posted by aaarrrgggh View Post


    (And I lost two months salary over the past two day... on paper, anyway.)



    Let me get this straight: a 10% loss is two months salary? So you have almost two years' salary invested in AAPL?
  • Reply 10 of 47
    g5mang5man Posts: 91member
    Hey I lost half a years salary yesterday. It was awful, but it will recover.



    I have faith in drjones. 160 by end of Oct.



    We are green today, you know. The bottom was reached today at 127 and change.
  • Reply 11 of 47
    melgrossmelgross Posts: 31,737member
    Quote:
    Originally Posted by Denton View Post


    Let me get this straight: a 10% loss is two months salary? So you have almost two years' salary invested in AAPL?



    Why is that so unusual?



    You ARE supposed to save and invest.
  • Reply 12 of 47
    this is the same analyst who put a "hold" recommendation on apple when it was at 100.



    now the stock is overpriced (up close to to 75% for the year) and he recommends buying the stock since it came down slightly from its all-time high.



    the stock has gotten ahead of itself.



    wait, be patient, and buy it when it goes down to 120.
  • Reply 13 of 47
    yayaya
  • Reply 14 of 47
    SpamSandwichSpamSandwich Posts: 31,185member
    Quote:
    Originally Posted by madeincupertino View Post


    this is the same analyst who put a "hold" recommendation on apple when it was at 100.



    now the stock is overpriced (up close to to 75% for the year) and he recommends buying the stock since it came down slightly from its all-time high.



    the stock has gotten ahead of itself.



    wait, be patient, and buy it when it goes down to 120.



    120? Unlikely.
  • Reply 15 of 47
    jasenj1jasenj1 Posts: 916member
    Apple is popular right now. Popular as in lots of people are talking about it and lots of people are trading it. Mentioning Apple is a sure way to get eyeballs/clicks. And "the herd" has always been sensitive to Apple news/rumors.



    I wish I had the liquidity to pump some more $$$ into Apple. <$130 is a great buying opportunity. As this analyst noted, Apple's core business - computers - is doing great and a model refresh is expected soon. Longer term, add in the iPhone derived iPods, the iPhone-mini, the iPhone expansion to Europe, Apple TV 2.0, etc., etc. and Apple has a lot of good things in store.



    - Jasen. (AAPL shareholder since $17 per share - but not enough to retire )
  • Reply 16 of 47
    shaun, ukshaun, uk Posts: 1,050member
    I love capitalism!



    Bank stockbroker buys Apple stock.

    Bank analyst predicts good times for Apple.

    Apple stock goes up.

    Bank stockbroker sells Apple stock and makes a tidy profit.

    Bank analyst predicts trouble for Apple.

    Apple stock goes down.



    The bank makes lots of money while everyone else gets screwed.
  • Reply 17 of 47
    Quote:
    Originally Posted by melgross View Post


    Why is that so unusual?



    You ARE supposed to save and invest.



    Congratulations about the Apple stock you that own doing so well. However many people on this board seem to be a bit overenthusiastic about Apple stock. If you are making major investments in a single stock (i.e., more than 5% of your portfolio) you are taking tremendous risk. Memories are short but I would remind you all about the late spring of 2001 and 99% of internet companies and also stocks like Global Crossing, Lucent, Enron (It was considered a world class company before it was exposed as a giant fraud), and WorldCom. Mom 'n Pop investors got cleaned out.



    Stocks can be volatile beyond a 10% move. It even happens with Apple. When I was making equity options markets (Yes I am a pro trader and have an intimate relationship with risk), a friend of mine bought 100 apple call options with the stock around $60 in 2002. That is the equivalent of 10,000 shares. Typically one would sell short about 5000 shares of apple to hedge risk, but he didn't because he wanted to sell stock a dime higher. By the time he traveled 5 floors to the office after the close Apple fell $30 or 50% in after hours trading. I think he lost about $180,000+ in 5 minutes that afternoon because he was greedy and wanted to make an addition $500 on the trade.



    As a fellow Apple enthusiast (I can't wait for the new iMac) I would urge you to act like a Wall Street pro and pare back some of your apple position, enjoy your profits and bragging rights on a good trade. Then use the proceeds and buy a S&P 500 ETF like IVV. That is prudent saving and investing.



    You may not make as great of returns but your risk level will plummet.
  • Reply 18 of 47
    g5mang5man Posts: 91member
    Quote:
    Originally Posted by farmboy1 View Post


    Congratulations about the Apple stock you that own doing so well. However many people on this board seem to be a bit overenthusiastic about Apple stock. If you are making major investments in a single stock (i.e., more than 5% of your portfolio) you are taking tremendous risk. Memories are short but I would remind you all about the late spring of 2001 and 99% of internet companies and also stocks like Global Crossing, Lucent, Enron (It was considered a world class company before it was exposed as a giant fraud), and WorldCom. Mom 'n Pop investors got cleaned out.



    Stocks can be volatile beyond a 10% move. It even happens with Apple. When I was making equity options markets (Yes I am a pro trader and have an intimate relationship with risk), a friend of mine bought 100 apple call options with the stock around $60 in 2002. That is the equivalent of 10,000 shares. Typically one would sell short about 5000 shares of apple to hedge risk, but he didn't because he wanted to sell stock a dime higher. By the time he traveled 5 floors to the office after the close Apple fell $30 or 50% in after hours trading. I think he lost about $180,000+ in 5 minutes that afternoon because he was greedy and wanted to make an addition $500 on the trade.



    As a fellow Apple enthusiast (I can't wait for the new iMac) I would urge you to act like a Wall Street pro and pare back some of your apple position, enjoy your profits and bragging rights on a good trade. Then use the proceeds and buy a S&P 500 ETF like IVV. That is prudent saving and investing.



    You may not make as great of returns but your risk level will plummet.



    Normally I would agree with most of your sentiments. But Apple is no internet company. Most of those companies did not even post a profit and they were trading at ridiculous P/E's. Yes aapl is a bit pricey given its higher then safe p/e of 39. But your example about the guy who lost 180K is not the proper one to justify buying only 5% of aapl in your portfolio. Options trading is very risky. Long term like 5 to 10 years makes aapl a great investment. I am in 100% because I know that Apple is at the beginning of a great upward movement. Sure we might have economic slowdowns, part issues, recalls, possible scandles, and recessions. But in 5 years at 133 aapl was a bargain of a life time.
  • Reply 19 of 47
    melgrossmelgross Posts: 31,737member
    Quote:
    Originally Posted by farmboy1 View Post


    Congratulations about the Apple stock you that own doing so well. However many people on this board seem to be a bit overenthusiastic about Apple stock. If you are making major investments in a single stock (i.e., more than 5% of your portfolio) you are taking tremendous risk. Memories are short but I would remind you all about the late spring of 2001 and 99% of internet companies and also stocks like Global Crossing, Lucent, Enron (It was considered a world class company before it was exposed as a giant fraud), and WorldCom. Mom 'n Pop investors got cleaned out.



    Stocks can be volatile beyond a 10% move. It even happens with Apple. When I was making equity options markets (Yes I am a pro trader and have an intimate relationship with risk), a friend of mine bought 100 apple call options with the stock around $60 in 2002. That is the equivalent of 10,000 shares. Typically one would sell short about 5000 shares of apple to hedge risk, but he didn't because he wanted to sell stock a dime higher. By the time he traveled 5 floors to the office after the close Apple fell $30 or 50% in after hours trading. I think he lost about $180,000+ in 5 minutes that afternoon because he was greedy and wanted to make an addition $500 on the trade.



    As a fellow Apple enthusiast (I can't wait for the new iMac) I would urge you to act like a Wall Street pro and pare back some of your apple position, enjoy your profits and bragging rights on a good trade. Then use the proceeds and buy a S&P 500 ETF like IVV. That is prudent saving and investing.



    You may not make as great of returns but your risk level will plummet.



    I've been investing since I was 13, back in 1963. In all that time, I've been told that you should have a "basket" of stocks. The idea being that when half go down, the other half would go up, saving you from loss (that is the simplistic version I know).



    I would never say that one should not have more than 5% of your stock portfolio in one stock. That's foolish advice. It assumes that you have made little investigation into any of the stock you buy. If that is so, don't invest in stocks at all.



    My attitude has always been that I'm not investing so that my portfolio stays the same. I'm not interested in investing in 4 bad stocks as well as 4 good stocks. What they don't say about that strategy, is that you don't do well with it unless the market is also doing well.



    The same is true of mutual funds. The more diversified they are, the more they perform like the market.



    But, smaller funds can do well for a few years, and then flop after that. In fact, that is almost always what happens. The fund manager of the year today, is often out of a job two years from now.



    So, no, I prefer to know exactly what I'm doing. I have never used bird-shot to pick my stocks, except in the later '90's when picking almost any tech IPO made me plenty of money in the short term.



    I know the computer industry, and some related industries. I stick to that, and go nowhere else. It's served me well. I have few stocks now, though I have other investments.



    I don't recommend that anyone just buy stocks. A balanced portfolio is the safest thing for most people. If you are young, and have a good career, with little responsibilities, you can be less risk adverse, and take greater chances for higher returns.



    But, as you get older, and have a family, possibly a mortgage, you have to be more careful. A savings account, stocks, and other less volatile securities is what I would recommend.



    As you get towards the latter part of your life, income producing investments should predominate, unless you have enough so that you can afford to lose a lot, and have no need to leave much to your family.



    Always be cautious. I never advocate recklessness.
  • Reply 20 of 47
    quinneyquinney Posts: 2,525member
    Quote:
    Originally Posted by g5man View Post


    Options trading is very risky. Long term like 5 to 10 years makes aapl a great investment. I am in 100% because I know that Apple is at the beginning of a great upward movement. Sure we might have economic slowdowns, part issues, recalls, possible scandles, and recessions. But in 5 years at 133 aapl was a bargain of a life time.



    The options trade to which your reply refers was very risky. It is a myth that all options

    trading is risky, when in fact, option strategies can be devised which greatly reduce the

    risk of a stock portfolio. For just one simple example, someone who has 100% of their

    portfolio invested in one stock might want to consider buying some out of the money

    protective puts as insurance against a huge drop in that stock. Such a drop might occur

    in the event of the death, serious illness, or retirement of a key executive.
Sign In or Register to comment.