AmTech downgrades Apple shares to Neutral on variety of concerns

Posted:
in General Discussion edited January 2014
Investment firm American Technology Research on Tuesday cut its long-standing Buy rating on shares of Apple Inc. to Neutral, citing near-term concerns with the stock's valuation, high expectations on the part of investors, and a potential product vacuum ahead of the third calendar quarter.



"We are downgrading our rating on Apple shares to Neutral from Buy for four key reasons," analyst Shaw Wu wrote in a note to investors. "This was a very tough decision as we have been bullish on Apple for the past several years, watching the stock more than triple."



Specifically, Wu noted that shares are now trading at 32 times calendar year 2008 earnings and near his previously stated $175 price target. These levels are "not that compelling," he said, and warned of the potential for a 15 to 20 percent correction in the near term that could see the shares fall back to $135 to $140 levels.



"We are concerned that expectations may be too high with the stock rebounding over 45 percent in recent weeks," the analyst told clients. "While we believe Apple will report a strong quarter relative to guidance and published consensus estimates, we are concerned whether it will be good enough and whether investors will be as forgiving with conservative guidance."



Wu said he remains upbeat on the Cupertino-based company's product pipeline for the second half of the year, but said a dearth of product introductions leading up to that time could weigh on investor sentiment and thus the company's shares.



"Our supply chain checks indicate 3G iPhones will not likely ship in volume until July and new Macs until the September quarter, likely putting stress on the June quarter," he wrote.



Given the aforementioned data points, Wu said he would find it difficult to recommend that investors build their stake in Apple at current pricing. Shares of the company have historically been amongst the most volatile on the market, he noted, and recent trading suggests investors may be focusing too much on near-term results.



"Recall that in only the past year, Apple stock has been below $100, more than doubled to above $200 and fell more than 40 percent in less than two months to $115, only to move more than $50 to $168 in about seven weeks," he explained. "We find this trading action amazing and indicative of the trading environment despite Apple shares being arguably universally loved."



As such, Wu said he's taking a seat on the sidelines out of respect for this erratic trading history and his concern that near-term results and guidance may not be as robust as expected.



"As investors are clearly more focused on near-term results from Apple, we believe the stock has a good chance of underperforming from these levels for the next few months until investors again begin to focus on the future, and a robust second half pipeline of products," he wrote. 'At lower levels, we would be very inclined to build positions in Apple; however, we are in a market in which valuation matters, and we believe the stock at current levels is ahead of itself."



Shares of Apple were trading down $4.30 or more than 2.5 percent to $163.86 in morning trading on the Nasdaq stock market.

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Comments

  • Reply 1 of 27
    vinitaboyvinitaboy Posts: 156member
    This guy is truly a Johnny-Come-Lately when it comes to understanding and evaluating AAPL. Only Gene Munster of Piper Jaffray knows what he's talking about in this equity.
  • Reply 2 of 27
    walshbjwalshbj Posts: 864member
    Are analysts forecasting based on the needs of day-traders now?
  • Reply 3 of 27
    minderbinderminderbinder Posts: 1,703member
    Isn't Wu notorious for consistently making horrible predictions about apple?



    He seems to think that they won't ship anything new before July, while it sure looks like there will be a laptop refresh before then. Even if the next big thing is iPhone update in July, he doesn't think investors know that's on its way, and that they will all dump the stock because they're too impatient to wait one month?



    I'd agree that it would be risky to buy in the 160s, but his predictions about new products (no macs until september?) seem completely clueless.
  • Reply 4 of 27
    cubertcubert Posts: 728member
    Sorry, Shaw Wu, but you've got it wrong this time. We see this before every announcement of quarterly results - Apple's stock falls going in and after the results due to conservative guidance only to rebound over the next 1-2 weeks as the "analysts" realize they got it wrong, again.



    But, I'm sure they make a pretty penny shorting the stock, though.
  • Reply 5 of 27
    Call me crazy but within the past few years isn't apple notorious for making intelligent decisions?



    Its pretty unlikely that Apple would choose to hold off on a product refresh until after the back to school season especially when a larger portion of college students are making the switch to Apple. To keep that momentum, Apple has to have products that are some of the best on the market. I'm fairly certain that the folks at Apple know this and are planning for the season accordingly.
  • Reply 6 of 27
    Quote:
    Originally Posted by walshbj View Post


    Are analysts forecasting based on the needs of day-traders now?



    Yep. The freaks cost a company more lost valuation than any other factor. You can have the best business in the world, lowest P/E ratio, biggest dividends, highest profit margin, yada yada yada... but if ONE freak analyst says he's gonna downgrade you for a "variety" of reasons, the stock plummets. Wasn't just last week that another analyst upgraded Aapl and the stock went way up?



    Shows how much these freaks know. And yes, I HATE analysts.
  • Reply 7 of 27
    tundraboytundraboy Posts: 1,614member
    Quote:
    Originally Posted by walshbj View Post


    Are analysts forecasting based on the needs of day-traders now?



    Totally agree with you. With one or two exceptions, these analysts just focus on the extremely short term. But of course they have to keep changing their forecasts so they can pretend that they're doing something valuable. In the end though, they're just injecting more unnecessary volatility into a market that is already too volatile. Scumbag analysts.
  • Reply 8 of 27
    drjjonesdrjjones Posts: 162member
    Quote:
    Originally Posted by tundraboy View Post


    Totally agree with you. With one or two exceptions, these analysts just focus on the extremely short term. But of course they have to keep changing their forecasts so they can pretend that they're doing something valuable. In the end though, they're just injecting more unnecessary volatility into a market that is already too volatile. Scumbag analysts.



    God put the analysts there to teach us patience. lol
  • Reply 9 of 27
    SpamSandwichSpamSandwich Posts: 31,135member
    Thanks for causing a near $10 drop Wu... you moron.
  • Reply 10 of 27
    abster2coreabster2core Posts: 2,501member
    Quote:
    Originally Posted by AppleInsider View Post


    As such, Wu said he's taking a seat on the sidelines out of respect for this erratic trading history and his concern that near-term results and guidance may not be as robust as expected.



    Some may not like it, but analysts have a job to do and this guy is well respected and one of the best in the business. http://biz.yahoo.com/a/6/61497.html



    He is no lightweight. http://www.amtechresearch.com/compan...0&Sidebar=True
  • Reply 11 of 27
    aaarrrggghaaarrrgggh Posts: 1,578member
    Wu's right, based on his stated perspective. Right now, nothing looks phenomenal for the June quarter, and that will hurt earnings. With the iPhone price cuts, margins could be hurt (although you only take a small hit each quarter with the deferred earnings). If the 3G iPhone isn't out in early June, it could be a miserable quarter.



    I think AAPL is a pretty good value below 170, but with overall market volatility we are likely to see it back to 140 soon. He is telling his clients to not be buying close to 170 thinking that the economic picture has improved, or that AAPL is immune to the problems of other companies.



    Look what Apple's stock has been doing compared to other companies lately; it has been moving up when the rest of the market is going down. Is there something so fundamentally strong about Apple today that this should be happening, or is it just speculation.



    Long term, it is still a great company to be in... but I wouldn't be putting money into it until after earnings have been digested at this point. Cash is more useful right now...
  • Reply 12 of 27
    MacProMacPro Posts: 18,260member
    Quote:
    Originally Posted by SpamSandwich View Post


    Thanks for causing a near $10 drop Wu... you moron.



    I second that comment!
  • Reply 13 of 27
    walshbjwalshbj Posts: 864member
    I don't have much respect for the analysts, and while I agree Wu had a hand in today's drop his effects will only last for a day. Someone who hasn't watched aapl for long might be surprised to see it tank after beating street estimates.

    However - if you've been around the block with aapl a few times you'd see the effects of blowing out a quarter only last until The Street turns its attention to the lowball estimates for the following quarter. In a way, aapl drives that drop with its ever-conservative guidance.

    Looking forward to details on MBA sales, I wonder if we'll get that break-out.
  • Reply 14 of 27
    tundraboytundraboy Posts: 1,614member
    Quote:
    Originally Posted by drjjones View Post


    God put the analysts there to teach us patience. lol



    Actually, God put the analysts there to teach us about buying opportunities.
  • Reply 15 of 27
    eldernormeldernorm Posts: 232member
    Quote:
    Originally Posted by digitalclips View Post


    I second that comment!



    While I think most analysis are morons, I say "You go Wu!!" Drive that Apple stock price back down to , oh , say 120. And hurry up to. My stock person screwed up a chance to get a number of shares at 120 and I want a second chance. LOL :-) Lets see the price plummet to say 120, let me get my cheap shares and then it can rise like a Phoenix back to 180. :-)



    Analysis, cannot live with them, cannot burn them in the town square. :-)



    en
  • Reply 16 of 27
    backtomacbacktomac Posts: 4,579member
    Et tu, Brutus.
  • Reply 17 of 27
    Shaw Wu Downgrade Reminiscent of Stock Manipulation

    Tuesday, April 22, 2008

    http://bullcross.blogspot.com/2008/0...-of-stock.html



    Shares of Apple, Inc. (Nasdaq: AAPL) tumbled more than 5.00% or $9.00 this morning on the NASDAQ stock exchange when AmTech analyst Shaw Wu cut his rating on shares of Apple from Buy to Neutral. As the guiding reasoning for the downgrade, Shaw Wu claims "We are concerned that expectations may be too high with the stock rebounding over 45 percent in recent weeks," the analyst told clients. "While we believe Apple will report a strong quarter relative to guidance and published consensus estimates, we are concerned whether it will be good enough and whether investors will be as forgiving with conservative guidance."



    Really? Well, Mr. Wu, why don't you give the investor a chance to make their own decisions instead of making their decisions for them one day before earnings? By downgrading Apple one day before earnings, Shaw Wu has all but triggered a pre-earnings sell-off, thus making it difficult for Apple to make any meaningful move to the upside when it reports tomorrow afternoon. Shaw Wu knows all too well what happens when an analyst downgrades Apple. He knew or should have known that Apple would fall precipitously on the downgrade. What is more, he knew or should have known that Apple would fall more than usual when downgraded just one day before earnings. He know or should have known that stocks tend to be at the precipice of a huge move in and around earnings. Thus, I wonder, what is Shaw Wu's real motivation with his downgrade this morning? Is it because his $175 price target was, like other analysts targets, about to be obliterated as too low? Or perhaps he wanted to allow certain key investors one last opportunity to get into the stock before it makes a huge move in the future. Whatever the reason, his motivation should at least be called into question.



    Shaw Wu's actions are clearly suggestive of stock manipulation. And this isn't the first time Mr. Wu of AmTech has conducted himself in the practice of mindlessly bashing the stock for no legally viable reason. In June-July of 2006, Shaw Wu's actions were so abhorrent, that he has lost a lot of credibility in my eyes. His financial analysis is good at times, but for the most part, he is a worthless analyst with nothing meaningful to contribute from a financial perspective. In April of 2006, Apple reached a high of $73.80 after it reported solid second quarter earnings. Yet, shortly after the earnings report, everything fell apart and quickly. Apple fell from $73.80 in April to $50.00 in July. Part of this had to do with Fed Chief Ben Bernanke telling Maria Bartaromo of CNBC that he didn't want investors to think we was done raising interest rates and part of the sell off had to do with the market predicting a recession that never happened. Yet, notwithstanding the market sentiments during the period, much of the sell-off was due to an orchestrated bashing led by none other than Shaw Wu of AmTech.



    Shaw Wu started a baseless rumor that Apple was expected to release a new iPod Nano in August. He claimed that the street consensus was for an iPod relase in August when no one on the street was expecting such a release. What I don't quite understand is how one can get away with claiming that "the street" has a consensus estimate for when a product will be released, when no on "the street" shares that view? Both conventional wisdom and sensible analysis indicated that Apple would release the new 2G iPod Nano in September when Apple usually releases such refreshes. Yet, Shaw Wu built up a straw man that Apple was expected to release the Nano in August and then knocked down that straw man by saying that Apple has delayed its release. Every time Shaw Wu released an "updated note" on the Nano delay controversy, the stock price fell significantly. I know. I was there.

    On June 15, 2006, Shaw Wu said in a research note to clients, "We are seeing weaker iPod nano shipments offset by strength in video iPods and iPod shuffles. We continue to believe the iPod nano is in need of a refresh and will likely see one in the September quarter." Notice how Shaw Wu holds the general view that the iPod Nano will be released in the September quarter. He is clever in saying the words "September quarter" instead of saying the month of September. Just two weeks later, when the market started selling off, Shaw Wu writes another note where he argues that the iPod Nano has been delayed for a quarter or two. This is where the rumor mongering begins. He also cut his price on shares of Apple from $101 to $75 that day. When Apple was down, Shaw Wu kicked Apple in the face.



    On July 10, 2006, Shaw Wu all of sudden, and for no good reason, claims that the street's consensus view for a new iPod Nano was for the July-August time frame when no one on the street shared that view. Appleinsider notes, "In a research note released to clients on Monday morning, American Technology Research analyst Shaw Wu maintained his stance that the new iPod nano -- which he has dubbed the "mini video iPod" -- will miss the Street's consensus view of a July or August introduction." Give me a break! Shaw Wu writes two separate research notes on a largely unconfirmed and insignificant iPod Nano delay within a 2-week period. For those who were invested in Apple in 2006, they will agree that the "iPod Nano delay controversy" was very reminiscent of the missing iPhone debate that was spurred by Bernstein Research analyst Toni Sacconaghi this past January. Shaw Wu went from bullish on June 14 to bearish on June 28. He cut his price target by 25% and made up a rumor about an iPod Nano delay. I wonder why? What motivated Shaw Wu's actions at that time? And then, when Apple reports blow out earnings on July 19, 2006, Shaw Wu's sentiments change completely?



    Either Shaw Wu is terrible at financial analysis or he knows what he is doing and actively attempts to manipulate the stock price. He was either dead wrong about the Nano delays as Apple released the 2G iPod Nano on September 12, 2006 or he actively manipulates. Shaw Wu was either dead wrong about his price cut of Apple's shares from $101 to $75 or he actively attempts to manipulate. I have just a few questions Mr. Wu: Why did you make up a rumor that Apple was set to release a Nano in August 2006 and then make up another rumor that the iPod would be delayed? Why did you go from bullish to bearish in two weeks? What changed? How does it feel to be dead wrong? Why did you downgrade Apple with one day to go until earnings? Is it because you have no clue as to what you are talking about or is because someone has paid you to downgrade Apple today? Either way, investors should ignore anything you have to say.



    Finally, you say that you think Apple is trading at 28 times 2009 earnings? Believing that Apple is trading at 28 times 2009's earnings when it trades at $168 presupposes that 2009 earnings will be $6.00 a share. That's interesting. So you think Apple will show almost no growth between 2008 and 2009? Let me let you in on a little secret. Apple is going to earn $5.80 in 2008. Thus, your 28 times 2009 estimates of $6.00 in EPS assumes that Apple will see only 3.5% growth in 2009 - a year when Apple will start to see an impact to EPS from deferred iPhone revenue. The computer industry is growing at 11% a year alone. I guess you think that Apple will grow at 1/4 of the current market rate.

    Given Shaw Wu's quesitonable history, Shaw Wu is either terrible at financial analysis and forecasting or an active manipulator. Either way, investors should take what he has to saw with a huge grain of salt.



    Disclosure: I own long term 2009 and 2010 call options in Apple. The information contained in this blog is not to be taken as either an investment or trading recommendation, and serious traders or investors should consult with their own professional financial advisers before acting on any

    thoughts expressed in this publication.
  • Reply 18 of 27
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by andyzaky View Post


    Shaw Wu Downgrade Reminiscent of Stock Manipulation



    In Wu's defense, the market as a whole is down today and Apple has down well past the market average over the previous two trading days. Though, Google is up several percent today and held it's 20% increase from Friday.





    Prediction: AAPL will see $200/share again before the end of August.
  • Reply 19 of 27
    Quote:
    Originally Posted by solipsism View Post


    In Wu's defense, the market as a whole is down today and Apple has down well past the market average over the previous two trading days. Though, Google is up several percent today and held it's 20% increase from Friday.





    Prediction: AAPL will see $200/share again before the end of August.



    That's true, yet I still think that posting a downgrade one day before earnings can have a disasterous affect on a stock. Here's why:



    1. Apple is running up in anticipation of earnings. It's not altogether clear whether Apple will move up or down on earnings. It's probably dependent on how much of a beat Apple posts on eanrings. Yet, because Shaw Wu has told us that everyone has high expecatations, when they don't, when Apple reports strong numbers, its going to sell off anyways.



    Before today, the consensus was for $1.07 in EPS. The high estimate was for $1.23 by Citi - way higher than any other estimate. Analysts have been generally cautious this quarter. Because of the cautious outlook, Apple is up a mere $5.00 on the quarter. By saying expectations are high, and that earnings might be baked in, it's will create a self-fulfilling prophecy. When Apple reports, the market will think that everyone else thinks that those strong numbers have been baked in, and sell the stock.



    Had Shaw Wu said nothing, when Apple reports $1.33 tomorrow, the market might have taken Apple up to $190 thinking that strong earnings wasn't baked in.



    Instead, we get a sell-off today, and artificial high expectations. Thus, we'll probably get a sell-off tomorrow as well. This means that Apple, which might be trading at $144 tomorrow, could have been trading at $190 had it not been for Shaw Wu's complete stupidity.
  • Reply 20 of 27
    19841984 Posts: 955member
    Quote:
    Originally Posted by aaarrrgggh View Post


    If the 3G iPhone isn't out in early June, it could be a miserable quarter.





    How can it be a miserable quarter if they are turning a profit?
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