Apple shares tumble on downgrades from investment banks
Shares of Apple bled more than 17 percent of their value in Monday morning trading on the Nasdaq stock market after analysts for investment banks Morgan Stanley and RBC Capital both downgraded their outlook on the company, citing a worsening consumer environment.
Morgan Stanley
Morgan Stanley analyst Katy Huberty cited three primary concerns while downgrading shares from Overweight to Equal-weight, and cutting her fiscal 2009 per-share earnings growth estimate to 6 percent -- 9 percent below the Street's 15.5 percent consensus target.
First, she said, PC unit growth is decelerating to the point where the remaining growth opportunities largely exist in the sub-$1,000 market, a segment where Apple doesn't yet compete.
The analyst also outlined a new series of performance scenarios where the best case would have the company's per-share earnings growth decelerating "meaningfully" from levels reported at the end of the June quarter. She now expects December quarter per-share earnings to decline 8 percent year-over-year, compared to the 29 percent growth witnessed during the June quarter.
"Lastly, we believe multiples for high growth stocks will continue to compress in the current environment and, in the context of our 6% fiscal 2009 per-share earnings growth assumption, we don?t believe Apple is immune to this trend," Huberty wrote.
She cut her price target on the Mac maker's shares from $178 to $115.
RBC Capital Markets
Over at the Royal Bank of Canada, analyst Mike Abramsky downgraded Apple shares to Sector Perform from Outperform, citing a "worsening consumer spending environment" that has led to reduced visibility to growth and margins, as well as elevated risk to valuation.
In particular, he pointed to his firm's most recent Changewave study that shows Mac purchase intentions suddenly moderating, with 29% intending to purchase a Mac laptop next 90 days (down from 34% in August) and 26% intending to purchase a Mac desktop (down from 30% in August).
"These are the biggest declines in 2-1/2 years," he wrote, adding that a separate Changewave study of 4,100 respondents revealed that 40% of consumers plan on spending less on electronics next 90 days, which is "the weakest outlook ever seen."
While Abramsky is a firm believer that Mac momentum remains strong, he modeled his 3 million unit September quarter estimate down to 2.9 million units, and said he sees elevated risk for disappointing guidance from the company for its holiday quarter.
Still, the analyst expects the company to report sales of 14 million iPhones in 2008, 24 million in 2009, and see its shares of the PC market rise to 4.1 percent by the end of 2009.
Abramsky, who cut his price target on Apple shares to $140 from $200, suggested the company could use some of its $21 billion in cash to repurchase about 5 percent of its outstanding shares "without significantly impacting its financial position and return to shareholders some of its expected strong fiscal 2009/2010 cashflow."
Shares of Apple were trading down $22.30 (or 17.39%) to $105.94.
Morgan Stanley
Morgan Stanley analyst Katy Huberty cited three primary concerns while downgrading shares from Overweight to Equal-weight, and cutting her fiscal 2009 per-share earnings growth estimate to 6 percent -- 9 percent below the Street's 15.5 percent consensus target.
First, she said, PC unit growth is decelerating to the point where the remaining growth opportunities largely exist in the sub-$1,000 market, a segment where Apple doesn't yet compete.
The analyst also outlined a new series of performance scenarios where the best case would have the company's per-share earnings growth decelerating "meaningfully" from levels reported at the end of the June quarter. She now expects December quarter per-share earnings to decline 8 percent year-over-year, compared to the 29 percent growth witnessed during the June quarter.
"Lastly, we believe multiples for high growth stocks will continue to compress in the current environment and, in the context of our 6% fiscal 2009 per-share earnings growth assumption, we don?t believe Apple is immune to this trend," Huberty wrote.
She cut her price target on the Mac maker's shares from $178 to $115.
RBC Capital Markets
Over at the Royal Bank of Canada, analyst Mike Abramsky downgraded Apple shares to Sector Perform from Outperform, citing a "worsening consumer spending environment" that has led to reduced visibility to growth and margins, as well as elevated risk to valuation.
In particular, he pointed to his firm's most recent Changewave study that shows Mac purchase intentions suddenly moderating, with 29% intending to purchase a Mac laptop next 90 days (down from 34% in August) and 26% intending to purchase a Mac desktop (down from 30% in August).
"These are the biggest declines in 2-1/2 years," he wrote, adding that a separate Changewave study of 4,100 respondents revealed that 40% of consumers plan on spending less on electronics next 90 days, which is "the weakest outlook ever seen."
While Abramsky is a firm believer that Mac momentum remains strong, he modeled his 3 million unit September quarter estimate down to 2.9 million units, and said he sees elevated risk for disappointing guidance from the company for its holiday quarter.
Still, the analyst expects the company to report sales of 14 million iPhones in 2008, 24 million in 2009, and see its shares of the PC market rise to 4.1 percent by the end of 2009.
Abramsky, who cut his price target on Apple shares to $140 from $200, suggested the company could use some of its $21 billion in cash to repurchase about 5 percent of its outstanding shares "without significantly impacting its financial position and return to shareholders some of its expected strong fiscal 2009/2010 cashflow."
Shares of Apple were trading down $22.30 (or 17.39%) to $105.94.
Comments
I really hate the stock market, you think I would learn...but never do
I hear ya... or should I say, I am feeling it...
She cut her price target on the Mac maker's shares from $178 to $115.
In particular, he pointed to his firm's most recent Changewave study that shows Mac purchase intentions suddenly moderating, with 29% intending to purchase a Mac laptop next 90 days (down from 34% in August) and 26% intending to purchase a Mac desktop (down from 30% in August).
A couple of observations here... saying that you were 40% off on your target days before doesn't instill much confidence in me that you know what you are talking about. Follow the leader on the downgrades?
And, a lot of people know (or think they know) that new laptops are coming out soon, and that the imac and Mac Pro are due for a refresh/remake, thus the sudden moderation in intent to purchase.
I am buying more AAPL at these levels.
I think Apple will buck the trend as consumers want value for their money.
I did say it would tumble to $99.00
Not too far off.
I still think it will tumble even further past $88 once the real crash sets in. Maybe even to the 50's.
Don't believe me?
Watch...but first there will be a buying frenzy AFTER it dips even lower. This is where all the suckers get taken.
Apple has been rocking and rolling lately on the global scene.. and I think the stock will adjust in a year or two to even higher levels when it becomes apparent how well the iPhone, App Store, and Mac Touch have affected their bottom line.
Plus, remember, Apple is a DEBT-FREE company! I wouldn't be surprised if some of the PC makers stopped making computers in the coming rough times.. I think Apple is very well positioned to gobble up more of the market.
and, I too am going to buy more AAPL at these levels!
I imagine many others are holding off on their purchases too. Now's the time to get stock because if the new machines come out we'll see a good buying season despite the economic slowdown.
First, she said, PC unit growth is decelerating to the point where the remaining growth opportunities largely exist in the sub-$1,000 market, a segment where Apple doesn't yet compete.
[ View this article at AppleInsider.com ]
Funny how she mentioned sub-$1,000 just as rumors about a possible new notebook refresh and possible desktop with price cuts. which will bring the MacBook basic configuration below $1,000. Beside, Apple already have sub-$1,000 computer called Mac Mini but I guess cheap computers should also be ugly and noisy to qualify as cheap.
Maybe RBC wanted to give Apple an equivilant Hit to even things up with RIM?
If they can't even get their own act together, how can they know anything about anyone else?!
A couple of observations here... saying that you were 40% off on your target days before doesn't instill much confidence in me that you know what you are talking about. Follow the leader on the downgrades?
And, a lot of people know (or think they know) that new laptops are coming out soon, and that the imac and Mac Pro are due for a refresh/remake, thus the sudden moderation in intent to purchase.
I am buying more AAPL at these levels.
I think Apple will buck the trend as consumers want value for their money.
Spot on studiomusic. It is amazing to see how the "experts" still have the gall to tell me what I and my business are prepared to buy when half of them have just lost their drawers. I think a lot of it comes from them pushing paper or pixels around a desk(top) and not actually making something that people WANT to buy.
Funny how these investment banks can downgrade Apple's stock-maybe they should have downgraded their own first!!
If they can't even get their own act together, how can they know anything about anyone else?!
Yet the street still listens to these analysts.
They try every little excuse to bring down the stock price just so they can buy low. Time and time again Apple still sells iPods,iPhones and Macs, regardless of the economy. I surveyed people in line buying iPhone and they said they would eat Top Ramon for a month just to have an iPhone if they could not afford it.
Every little excuse is right. These investment banks:
1) Make money on trades (other people buying and selling through them)
2) Are suffering right now big-time . . .
Are we surprised that they want to kick a good stock in the teeth with some
flimsy excuses, watch it drop as people sell, sell, sell, and then in a few
weeks when new laptops are announced they praise it and lift their
expectations, then watch people buy, buy, buy?
Watch for more of this. It's fear-mongering, followed by good-news-sharing,
followed by fear-mongering . . . to pump up trades both ways.
A couple of observations here... saying that you were 40% off on your target days before doesn't instill much confidence in me that you know what you are talking about. Follow the leader on the downgrades?
And, a lot of people know (or think they know) that new laptops are coming out soon, and that the imac and Mac Pro are due for a refresh/remake, thus the sudden moderation in intent to purchase.
I am buying more AAPL at these levels.
I think Apple will buck the trend as consumers want value for their money.
To your first point, they are dropping price expectations for 12 months from now, reflecting current economic conditions. Basically they are saying that they don't see any upside opportunity for the stock, given the broader market performance.
To the second point... My God I hope Apple introduces an Eee/MSI Wind/Aspire killer within two weeks. If they wait until MWSF it will be too late; they need it for the Christmas season. They also need to bring the Mini to a more compelling specification and price point from where I sit, and drop prices on the laptop line across the board by about 10-15%. For the first time in years I can't justify buying a mac for my business.
The bottom line is AAPL is likely to keep dropping for a while. I think they would have to put about $10B into a share repurchase to bring any positive momentum. The cards up their sleeves are the deferred revenue on the iPhone and the cash. I can't imagine a netbook coming out before MWSF...
Apple totally baffles the analysts because it just doesn't fit into their models. Is it a tech company ? A media company ? A mobile phone company ? A consumer electronics company ? A hardware company ? A software company ? A retailer ? A manufacturer ? An online retailer ?
The answer to all of those is 'Yes' - unlike any other company that exists. Therefore, Apple gets beat with the same stick that's beating every other stock in each of these markets. It's crazy.
With $21 billion sat in the bank I think Apple's looking pretty damned pretty right about now. I just hope that cash isn't sat in any of THESE banks' accounts....