Wall Street analysts weigh in on Apple's fourth quarter results

Posted:
in General Discussion edited January 2014
Several prominent Wall Street analysts issued new research notes following Apple's fourth quarter earnings announcement Tuesday, offering commentary on the company's forward looking prospects, and in some cases making changes to their ratings and price targets.



AppleInsider is offering a roundup of the analysts' reactions while noting any changes to their recommendations. Apple said Tuesday that fourth-quarter profits rose more than 26 percent to $1.14 billion, or $1.26 per diluted share, on revenues of $7.9 billion, driven by sales of 2.61 million Macs, 11 million iPods, and nearly 6.9 million iPhones.



Piper Jaffray analyst Gene Munster

Rating: Buy (no change)

Price Target: $250 (no change)



Munster said: "During the Sept. quarter, iPhone sales of 6.9m were significantly ahead of the Street at 5.0m, iPod sales were in-line, and Mac sales of 2.6m were slightly below expectations of 2.8m ahead of new portables in Oct. While the product cycles make it difficult to determine, we believe that Apple is weathering the economic storm better than expected. With new Macs at lower entry prices ($999), new iPods, and strong iPhone growth, we believe Apple is positioned to exceed Dec. quarter guidance."



He added: "Bottom Line. We remain buyers of AAPL. Based on comments from the conference call, we think the economy has only had a minimal impact on Apple's business, and believe Apple will exceed guidance for the December quarter. 2009 remains a wild card, but should get a boost from a family of iPhones not yet reflected in Street models."



Barclays Capital analyst Ben Reitzes

Rating: Overweight (no change)

Price Target: $125 (reduced from $135)



Reitzes said: "All-in-all, we believe the 4Q08 report will provide much needed relief for shareholders at least short-term for 4 key reasons: 1) sentiment was the most negative we’ve ever seen for Apple shares into any report, 2) while Macs and iPods were light, iPhone exceeded expectations significantly, causing cash flow to surge, 3) we believe investors will view the weak December quarter EPS guidance as conservative given the 30-31% gross margin outlook is hard to get to given component price trends and a mix shift toward iPhones. We believe the significant guide down for the December quarter was already widely expected. We note that Steve Jobs’ presence on the call also likely soothed investors and showed how he is on top of day-to-day issues and personally looking after shareholder money."



He added: "Despite a solid quarter, we want to take this opportunity to lower our estimates for Apple given checks continue to point toward risks around weakening economy. Checks detect more conservative build plans and it is unclear how electronics sales will hold up this holiday season looking at several indicators. As a result, we are lowering our unit estimates across the board, but raising our cash flow figures modestly to reflect higher than expected iPhone ASP’s (was $525 now over $600) and a strong cash conversion cycle. Weighing these factors, we estimate fiscal 1Q EPS of $1.35 (was $1.60), now based on flat y/y revenue growth to $9.6 billion (was $10.3 billion) and gross margin of 31.5% (was 32.9%)."



UBS analyst Maynard J. Um

Rating: Neutral (downgraded from Buy)

Price Target: $115 (reduced from $125)



Um said: "We are downgrading Apple to Neutral from Buy and lowering our price target to $115 from $125. Our downgrade is primarily based on two reasons: 1) macro uncertainty and the impact to consumer spending and 2) sustainability concerns over a surprisingly high iPhone ASP and margin."



He added: "With limited visibility and a lack of visible catalysts near-term, we believe it prudent to step to the sidelines at this time. We note that there should be downside support given the company’s $27/shr in net cash (which investors will eventually want to see better returns on), but do not see any near-term upside in light of uncertainty. Although our adjusted pro forma EPS (what we previously referred to as “peer-adjusted” EPS) reflects 18.8% growth year over year, we believe the potential macro risk warrants a discount to growth."



RBC Capital analyst Mike Abramsky

Rating: Sector Perform (no change)

Price Target: $125 (reduced from $140)



Abramsky commented: "Despite valuation having corrected to 18x FTM P/E and strong fundamentals (compelling products, iPhone upside, PC Share gains), Apple's challenges and thus risks to valuation (disappointing guidance, lower visibility, declining GMs, possible decelerating Mac/iPod growth) have increased, and we see valuation remaining rangebound and volatile pending improving investor visibility to growth and margin trends."



He added: "Ahead of the crucial holiday season, Apple’s Q1 guidance, at $1.06-1.35 EPS and $9-10B revenue came well below typically conservative guidance (10% miss vs. 3% avg) and street ($1.67, $10.7B), on 30-31% GMs (vs. 33% street), affirming slowing momentum and margin risks amidst the uncertain environment. Management acknowledged reduced visibility and forecasting challenges; this is the first time Apple provided a revenue range in almost 2 years (last time was Q2/F07), suggesting unprecedented uncertainty of outlook."



Needham & Co. analyst Charlie Wolf

Rating: Strong Buy (no change)

Price Target: $240 (no change)



Wolf said: "And as usual, fourth quarter earnings guidance was downbeat, anticipating the recession. However, the astonishing news coming out of the release was non-GAAP earnings, which treats the iPhone on a sales rather than amortization basis. On this metric, Apple earned $2.69 in the quarter. We’re maintaining our strong buy rating and our price target of $240. We’re reducing our fiscal 2009 GAAP earnings estimate from $5.95 to $5.65."



He added: "The overriding risk in the Apple story is the economy. If the impending recession is deeper or more prolonged than we anticipate, Apple’s revenues and earnings could fail to meet out estimates."
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Comments

  • Reply 1 of 30
    There's quite a disparity between price targets among these analysts. Some of them are not doing their homework.
  • Reply 2 of 30
    I think it's funny how Maynard J. Um is downgrading the stock from a buy, and his reason is basically "because the iPhone sold so well, we are scared that it might not sell in the future."



    I mean, if you parse out what these economic pundits say, half the time it doesn't even make sense. And if you follow what their predictions are versus what ends up actually happening, they seem to be right about as often as 50/50 coin toss would be.
  • Reply 3 of 30
    Quote:
    Originally Posted by Virgil-TB2 View Post


    I think it's funny how Maynard J. Um is downgrading the stock from a buy, and his reason is basically "because the iPhone sold so well, we are scared that it might not sell in the future."



    I mean, if you parse out what these economic pundits say, half the time it doesn't even make sense. And if you follow what their predictions are versus what ends up actually happening, they seem to be right about as often as 50/50 coin toss would be.



    These stock analysts aren't technically economic pundits, but I get your point.



    Actually, a person like Shaw Wu packs his analyses with so many weasel words he ends up suggesting BOTH positive and negative growth for Apple. Talk about ham-handed... His choice of words has turned him into an Alan Greenspan Mini Me.
  • Reply 4 of 30
    Actually, I tend to think of Shaw Wu as being about as accurate as being blindfolded, spun around and handed a dart to throw at a 2 foot diameter target 20 feet away.



    Shocking if it ever hits!
  • Reply 5 of 30
    ipeonipeon Posts: 1,122member
    The day we start paying attention to analysts is the day our economy goes to shit. Oh wait... never mind.
  • Reply 6 of 30
    solsunsolsun Posts: 763member
    Quote:
    Originally Posted by AppleInsider View Post


    2009 remains a wild card, but should get a boost from a family of iPhones not yet reflected in Street models."



    Did he miss the part of the call where Jobs implied that there will NOT be a "family of iPhones."



    When asked why Apple only has one product offering in the vast smartphone market and what further opportunities for innovation or "other market opportunities within that market" Apple might have, Jobs replied, "I wasn't alive then, but from everything I've heard, Babe Ruth only had one home run. He just kept hitting it over and over again.



    "I think that the traditional game in the phone market has been to produce a voice phone in a hundred different varieties. But as software starts to become the differentiating technology of this product category, I think that people are going to find that a hundred variations presented to a software developer is not very enticing. And most of the competitors in this phone business do not really have much experience in a software platform business."



  • Reply 7 of 30
    rickagrickag Posts: 1,626member
    Quote:

    Needham & Co. analyst Charlie Wolf

    However, the astonishing news coming out of the release was non-GAAP earnings, which treats the iPhone on a sales rather than amortization basis. On this metric, Apple earned $2.69 in the quarter.





    That is an incredible fact. The iPhone, the gift that keeps on giving. I hope Apple sells another 8 million this coming quarter. Aren't they adding something like 20 new countries this coming quarter.
  • Reply 8 of 30
    mj webmj web Posts: 918member
    Kathryn Huberty blew it again! Talk about numbers that don't add up. This charlatan from Morgan Stanley lowballed AAPL's EPS by a mid boggling 26 cents per share! She was off by 25%! How wrong can one person be? She missed the gross margins by 1.8%! She lowballed the revenue by $135 million. Her repeated hair-brain predictions have cost AAPL billions in market cap. She's a disgrace! Shareholders should besiege Morgan Stanley to fire her ass!
  • Reply 9 of 30
    virgil-tb2virgil-tb2 Posts: 1,416member
    Quote:
    Originally Posted by SpamSandwich View Post


    These stock analysts aren't technically economic pundits, but I get your point. ...



    Well, yeah. Probably the wrong term there, but not far off. It just strikes me how nonsensical the whole situation is.



    We are supposed to trust "analysts" like these because of their very objectivity. They supposedly have greater knowledge and analytical skills, and they use their command of the math, knowledge of the market and economic history to come to a determination. Yet if you put three or four of the most respected of the breed in a room together, they often cannot agree on much at all.



    To me this is the certain evidence that what they are engaged in is far more of a subjective process than we are willing to admit to ourselves.



    I have heard so many economic analyses over the years that spout reams of numbers and formulas aimed towards a certain conclusion, but then wraps up with something like "but I have a gut feeling..." (that essentially turns the analysis on it's head).



    Even in cases where that final factor is not merely a subjective feeling and is instead an objective fact, it's the "weight" applied to it that will either turn or not turn the analysis around. It seems to me that almost every time, the "weights" applied to the facts are strictly subjective decisions based on the experience of the analyst to that date.
  • Reply 10 of 30
    mj webmj web Posts: 918member
    Quote:
    Originally Posted by Virgil-TB2 View Post


    I think it's funny how Maynard J. Um is downgrading the stock from a buy, and his reason is basically "because the iPhone sold so well, we are scared that it might not sell in the future."



    I mean, if you parse out what these economic pundits say, half the time it doesn't even make sense. And if you follow what their predictions are versus what ends up actually happening, they seem to be right about as often as 50/50 coin toss would be.



    I'm scared.

    I don't know.

    Therefore I'm downgrading AAPL.

    That's what makes me such an EXPERT!
  • Reply 11 of 30
    vinney57vinney57 Posts: 1,162member
    More useless drivel from these overpaid storytellers......
  • Reply 12 of 30
    Quote:
    Originally Posted by solsun View Post


    Did he miss the part of the call where Jobs implied that there will NOT be a "family of iPhones."



    In point of fact there are already two distinct members of the "family of iPhones": the iPhone and the de-featured Touch (no telephony, camera) that both run the SAME SOFTWARE and APPs as appropriate to the respective family member (e.g. no bar code scanner for the Touch). I can easily see the "family of iPhones" growing by one or two more members next year, all running the SAME SOFTWARE and APPs as appropriate. For example, to use the Mac analogy which runs the SAME SOFTWARE and APPs as appropriate, a high end iPhone addition to the line and a lower end Touch.
  • Reply 13 of 30
    solsunsolsun Posts: 763member
    Quote:
    Originally Posted by David Stevenson View Post


    In point of fact there are already two distinct members of the "family of iPhones": the iPhone and the de-featured Touch (no telephony, camera) that both run the SAME SOFTWARE and APPs as appropriate to the respective family member (e.g. no bar code scanner for the Touch). I can easily see the "family of iPhones" growing by one or two more members next year, all running the SAME SOFTWARE and APPs as appropriate. For example, to use the Mac analogy which runs the SAME SOFTWARE and APPs as appropriate, a high end iPhone addition to the line and a lower end Touch.



    Yes, they run the same software. However, the Touch is not in the "Family of iPhones" it is in the family of "iPods." For sales and accounting purposes they are very distinctly separate.
  • Reply 14 of 30
    I think most of these analysts comments are funny, but the funniest is the Um guy who says he's downgrading

    the stock because the iphone margins are surprisingly high! Its not good that Apple nets $400 from each phone(grosses over $600) and that despite that they sold more phones than all of RIMM's combined, despite the fact that RIMM has been in many more countries(including China) and been there for the most part for

    years now and has established many distribution channels. Also RIMM sells many of their phones for half the price or less of an iphone. Apple could lower the retail price of the iphone to $0 and still make a ton of margin due to the payments from ATT and others,



    It is stunning how fast they are adding to cash, and in a quarter thats not a holiday quarter to boot.
  • Reply 15 of 30
    The other equally funny comment is Abramsky when he says in one sentence that Apple provided a range for 2nd qtr 2007 guidance then in the next sentence says the fact the Apple gave a range for this quarter is unprecedented! Maybe he should look up what the word unprecedented means.



    Jobs said April and October sales usually offer little help for quarter guidance.
  • Reply 16 of 30
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by MJ Web View Post


    Kathryn Huberty blew it again! Talk about numbers that don't add up. This charlatan from Morgan Stanley lowballed AAPL's EPS by a mid boggling 26 cents per share! She was off by 25%! How wrong can one person be? She missed the gross margins by 1.8%! She lowballed the revenue by $135 million. Her repeated hair-brain predictions have cost AAPL billions in market cap. She's a disgrace! Shareholders should besiege Morgan Stanley to fire her ass!



    First, OK, maybe a valid complaint. But you are complaining that she was off by less than 2%? Who gets within 2% consistently? Revenue being off by $135 million is 2% too. Exactly why are you complaining about such a small amount? Your complaints don't add up. No one gets that close consistently.
  • Reply 17 of 30
    Quote:
    Originally Posted by solsun View Post


    Did he miss the part of the call where Jobs implied that there will NOT be a "family of iPhones."



    A smaller, nano-style iPhone variant is most, most probably already in the works. Doesn't really mean anything if Jobs were to deny it in public. He does that kind of thing occasionally.
  • Reply 18 of 30
    solsunsolsun Posts: 763member
    Quote:
    Originally Posted by gilles_deleuze View Post


    A smaller, nano-style iPhone variant is most, most probably already in the works. Doesn't really mean anything if Jobs were to deny it in public. He does that kind of thing occasionally.





    Understood, although in the case of the iPhone I tend to believe his dismissal of a "family of iPhones"or variants in a smaller form factor. The point he brings up about developers is enough to justify that reasoning.
  • Reply 19 of 30
    kendokakendoka Posts: 110member
    Quote:
    Originally Posted by gilles_deleuze View Post


    A smaller, nano-style iPhone variant is most, most probably already in the works.



    No.

    Just because *some* customers wants a smaller phone without the benefits of a large multitouch screen doesnt mean that Apple will do it.



    Same story as the "Apple must make a cheap MiniTower/an iPod with radio/whatever or they are doomed" arguments.



    Apple will always strive to have few, but very well designed products. All giving the full "Apple experience".
  • Reply 20 of 30
    Quote:
    Originally Posted by nothowie View Post


    I think most of these analysts comments are funny, but the funniest is the Um guy who says he's downgrading

    the stock because the iphone margins are surprisingly high! .



    ha! indeed without anything negative to latch onto and exaggerate, they spin one of the most positive points of the quarter negatively.



    what a sad bunch of pillocks these analysts are.



    mostly.
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