GS downgrades Apple, says new product at Macworld unlikely
Shares of Apple slipped about 4 percent Monday after investment bank Goldman Sachs removed the company from its buy list for the first time in more than two years, citing concerns over consumer spending and a belief that Macworld Expo will not see the company embark on a major new product initiative.
In a note to clients, analyst David Bailey reiterated his long-term view that Apple’s ability to innovate will help the company maintain an edge on the competition, driving share gains through sales of existing products while still managing to be first to market in newer categories like Mobile Internet Devices (MIDs).
"That said, the nearer-term outlook is less positive, as it now looks unlikely that Apple will launch a new product category at MacWorld in early January, taking away a potential catalyst for the shares and causing Apple to try to generate demand in a tough environment without the benefit of a new offering in the first part of 2009," he wrote.
In particular, Bailey noted ongoing chatter of a "an upcoming touch-screen tablet," but said "it seems that this product is still in the development stage and will probably not be launched until the middle or back half of 2009."
Meanwhile, the analyst reported that although checks in Asia for the December quarter came back better for Apple than for the other PC and smartphone vendors, some signs of weakness have started to emerge.
"Specifically, shipments of MacBooks, iPod nanos, and iPhone were all slightly lower than what was expected going into the quarter and Apple should face a tougher environment in the March and June quarters as consumer demand takes another leg down," he wrote.
Bailey is expecting iPhone sales of around 5.5 million units for the December quarter, down about 1.4 million units from the September quarter. And while he didn't make a specific call on iPod sales, he noted that "iPod nano shipments dropped off significantly after holding up through the middle of November" while shipments have been stronger than expected for the lower-volume iPod touch.
The Goldman Sachs analyst downgraded shares of Apple to Neutral from Buy for the first time since July 20, 2006. He also trimmed his calendar year 2009 per-share earnings estimate to $4.75 from $5.13 and cut his 12-month price target on the stock to $115 from $125.
Shares of Apple were trading down $4.36 (or 4.4%) to $93.91 on the Nasdaq stock market.
In a note to clients, analyst David Bailey reiterated his long-term view that Apple’s ability to innovate will help the company maintain an edge on the competition, driving share gains through sales of existing products while still managing to be first to market in newer categories like Mobile Internet Devices (MIDs).
"That said, the nearer-term outlook is less positive, as it now looks unlikely that Apple will launch a new product category at MacWorld in early January, taking away a potential catalyst for the shares and causing Apple to try to generate demand in a tough environment without the benefit of a new offering in the first part of 2009," he wrote.
In particular, Bailey noted ongoing chatter of a "an upcoming touch-screen tablet," but said "it seems that this product is still in the development stage and will probably not be launched until the middle or back half of 2009."
Meanwhile, the analyst reported that although checks in Asia for the December quarter came back better for Apple than for the other PC and smartphone vendors, some signs of weakness have started to emerge.
"Specifically, shipments of MacBooks, iPod nanos, and iPhone were all slightly lower than what was expected going into the quarter and Apple should face a tougher environment in the March and June quarters as consumer demand takes another leg down," he wrote.
Bailey is expecting iPhone sales of around 5.5 million units for the December quarter, down about 1.4 million units from the September quarter. And while he didn't make a specific call on iPod sales, he noted that "iPod nano shipments dropped off significantly after holding up through the middle of November" while shipments have been stronger than expected for the lower-volume iPod touch.
The Goldman Sachs analyst downgraded shares of Apple to Neutral from Buy for the first time since July 20, 2006. He also trimmed his calendar year 2009 per-share earnings estimate to $4.75 from $5.13 and cut his 12-month price target on the stock to $115 from $125.
Shares of Apple were trading down $4.36 (or 4.4%) to $93.91 on the Nasdaq stock market.
Comments
I am also holding out hope for updated Time Capsules.
on earnings and rumors aren't flying about a new product for January.
Indeed, the interwebs are unusually quiet for this time of year. Almost too quite....
Indeed, the interwebs are unusually quiet for this time of year. Almost too quite....
Without being too much of a blinded fanboy
Sheldon
on earnings and rumors aren't flying about a new product for January. It will be interesting to see if Apple initiates some sort of buyback to help stock prices regain some losses or at least steady the stock some more (relative to impatient investors perspective). I doubt they'll do anything but they are one of the few companies in a great position to add value to their stockholders investment during this down time.
Why would you spend your cash on a share buy-back going into a nasty and possibly long recession? Don't you think it's better spent on operations and purchasing companies?
Also, where is he logic behind APple not wanting to release a new "product category" because of the economic situation? I'd imagine Apple would be keen to spur sales any way they can, not sit on stale products when sales are under pressure.
That's good news if they aren't introducing any radically new products. Apple needs to tighten up the products they are currently offering. The iPhone OS needs some work both in stability and features. OS X needs lots of work (push email, calendar, etc). The newest hardware has bugs. Less breadth and more depth is a good thing from where I'm sitting.
Sheldon
Very true, we probably could do with a session of decent patches and upgrades. In a similar fashion to the release of Snow Leopard. Tie loose ends before moving on to bigger and better things.
I think Apple is in good shape to ride out the coming storm, but let's face it--earning disappointments are going to be the rule, not the exception, for most companies this quarter.
And if you want to be even more conspiratorially inclined, another GS thug, Larry Summers, has an economic adviser role in the new administration.
My bet is that they will hammer down Apple's stock price, buy it with taxpayer money, make a killing when the price returns to a normal price and then steal the original money instead of giving it back to "we the people."
If you think I'm wearing a tinfoil hat, the joke's on you -- because ordinary people can only have access to aluminum foil. "They" don't want you to have actual tinfoil because those hats are effective!
Apple can still make their margins with a Netbook. Hopefully they can address the niggling issues that the other manufacturers have at a reasonable price point.
But, to hope that Apple can keep selling $1500 laptops when the market is shifting to $500 devices is foolish. Non dividend paying companies must continue exponential growth to keep value, which means adding new revenue streams over time. The iPhone has been proven to be a reliable driver of new growth, but loss of revenue in the iPod and MacBook franchises would be devistating.
GS is right on this one, unfortunately.
And if you want to be even more conspiratorially inclined, another GS thug, Larry Summers, has an economic adviser role in the new administration.
My bet is that they will hammer down Apple's stock price, buy it with taxpayer money, make a killing when the price returns to a normal price and then steal the original money instead of giving it back to "we the people."
/QUOTE]
Not only were they on the bail out list but they are still recommending Microsoft as are 24 other brokerage firms. It's not what you do in business that makes you a valuable asset it must be who you know just like in politics as we experienced in the last election.
on earnings and rumors aren't flying about a new product for January. It will be interesting to see if Apple initiates some sort of buyback to help stock prices regain some losses or at least steady the stock some more (relative to impatient investors perspective). I doubt they'll do anything but they are one of the few companies in a great position to add value to their stockholders investment during this down time.
what is the point of a buyback anyways? To increase the share price? The price will get hammered anyways and fall. That would seem like a waste of money. Is the point of a buyback for the company to buy low and sell its shares high at a later point to make $$$ ?
I have to think it would be unwise for Apple to launch any major new products in the current economy. You would almost guarantee it's failure. Now is the time to perfect what you do right, keep costs in line, reduce prices where you can.
I think Apple is in good shape to ride out the coming storm, but let's face it--earning disappointments are going to be the rule, not the exception, for most companies this quarter.
i thought steve jobs say you have to innovate during recession. i assume that means release new products?? or do you innovate now and then wait for economy to improve then release it.