Apple price targets reduced as company's growth slows to 'normal' levels

Posted:
in AAPL Investors edited January 2014
Apple is still growing, but not at the tremendous pace investors have become accustomed to over the last decade, which has prompted analysts to lower their price targets for the company's stock.

Products


Price target revisions for AAPL stock were issued following Apple's record earnings reported for the company's holiday 2012 quarter. But while Apple saw its best-ever profit and revenue, riding high on record iPhone and iPad sales, the company's stock tumbled more than 10 percent in after-hours trading.

Piper Jaffray

Analyst Gene Munster believes there are three main reasons why the stock traded down after hours on Wednesday:
  • iPhone units were below buy-side expectations of about 50 million.
  • Apple's new guidance methodology, employed for the first time on Wednesday, does not appear to leave room for "wild upside."
  • Based on the latest guidance, it's likely that gross margins will be down sequentially in March.
Because of the new gross margin guidance, Munster has reduced his projected calendar year 2013 revenue for Apple by 4 percent to $196.4 billion. He's also reduced his price target for AAPL stock from $875 to $767, but maintained an "overweight" rating.

AAPL
Source: Google

Topeka Capital Markets

Brian White also lowered his price target, given recent reductions in Apple's share price, from $1,111 to $888. But he remains bullish on the company and recommends that investors buy, with Apple's "recent rough patch" behind it and the company now "poised for better luck."

After Apple dropped 10 percent in after-market trading, it was trading at less than six times, excluding cash, White's calendar year 2014 earnings per share estimate.

"We believe there is quite a bit of bad news priced into the stock at current levels," he said.

Wells Fargo

Maynard Um said Apple's new way of providing guidance is "sparking fears" among investors, and could mean the end of "material upside to guidance." While it could create uncertainty in the near future, Um sees the resetting of Wall Street estimates as a good thing.

He also believes that the toughest year-over-year comparisons for Apple begin to ease in the second half of 2013. He also believes that greater economies of scale, presuming the next-generation iPhone has the same design as the iPhone 5, will improve the company's gross margins.

Wells Fargo has maintained its "outperform" rating for AAPL stock, but lowered its valuation range for the company to between $600 and $630.

iMacs
Apple blamed iMac production difficulties in part for disappointing Mac sales.

ISI Group

Brian Marshall admitted he has taken a "hatchet" to his calendar year 2013 estimates for Apple. His new earnings per share estimate for the company's calendar year 2013, for example, was cut 15 percent from $50 to $42.50.

Marshall believes that a lower-priced iPhone geared toward developing markets is "paramount to financial re-acceleration" for Apple. He believes Apple could sell an iPhone with a wholesale price of about $300 while still maintaining gross margins around 40 percent.

"We believe the end result would be price elasticity kicking in and driving a new phase of revenue/earnings re-acceleration, and AAPL shares would likely get their 'mojo' back," he said.

Morgan Stanley

Katy Huberty reiterated her overweight rating for Apple, calling the company's medium-term risk-reward an attractive option for investors. However, near-term catalysts for the company are limited, she admitted, as Apple faces tougher comparisons in the first quarter of calendar 2013.

As a result of this, Morgan Stanley has removed AAPL stock from its "Best Ideas" list for investors.

Huberty believes catalysts for Apple will begin in the company's June quarter, including an anticipated iPhone refresh, new iPads, and expanded carrier partnerships. She also noted that every $5 billion in share buyback conducted by Apple is expected to reduce the share count by 1 percent.

Needham & Co.

While most analysts have cut their price targets, Charlie Wolf reiterated his $750 target this week following Apple's earnings. He will, however, review the target in February, opting to not react immediately to the company's earnings.

But Wolf did reduce his fiscal 2013 earnings estimate to $45.70 billion, citing supply constraints on several products that have "put a damper on revenue growth."

"The ongoing risk in the Apple story continues to be whether the company can innovate at the same pace and with the same disruption that occurred during the Steve Jobs era as CEO," he said. "The price action of the stock following the release suggests the market does not believe it can."

Earnings
Apple CEO Tim Cook and CFO Peter Oppenheimer hosted Wednesday's call.

J.P. Morgan

Mark Moskowitz believes Apple's fundamentals and investor expectations continue to diverge. As such, he was "surprised" by the "sharp correction" that the company's stock took in after-hours trading on Thursday.

Moskowitz has reiterated J.P. Morgan's overweight rating for AAPL with a December 2013 price target of $725 holding fast.

"Without splitting hairs too much, we think the new guidance commentary is not much of a change and could restore beat-and-raise potential to the model," he said.

Moskowitz also believes the iPhone growth story is "far from over," particularly if supply constraints ease quicker than expected and LTE network expansion continues across the globe.

Deutsche Bank

Chris Whitmore isn't surprised that Apple's guidance for the March quarter was soft. But with the company at a "critical junction," he's reduced his price target to $575.

He believes Apple would be better served to introduce a lower-priced iPhone, which would allow the company to adopt what he called a "good, better, best" segmentation strategy.

In addition to prepaid markets, Whitmore believes there is substantial growth for Apple in larger form factor smartphones with screens larger than 5 inches.

Evercore Partners

Apple may be slowing, but the company is still growing, analyst Rob Cihra said. He has maintained an overweight rating for AAPL, but trimmed his price target from $750 to $675.

"We continue to see Apple effectively creating its own growth through innovative hardware+software engineering in a sea of otherwise commodity products, but now needing to digest the law of large numbers," he said. :Perhaps foremost, Apple's M.O. to date has been to cream the high-end off each market, but as the company's grown it may now need to target more of the mainstream."

RBC Capital Markets

Amit Daryanani believes Apple is "bent, not broken." He said this week's results are a sign that Apple is executing well as they shift to becoming what he called a "normal growth company."

But RBC has trimmed its price target for AAPL to $600, down from $725. The firm has maintained its "outperform" rating.

Canaccord Genuity

Michael Walkley believes Apple has a strong product pipeline that will reaccelerate the company's year-over-year earnings growth during the June quarter. The firm has reiterated its buy rating, but lowered its price target to $650.

Walkley believes Apple's "soft" guidance for the March quarter is a result of ramping supply of the iPhone 5 during the December quarter, along with what he believes could be an earlier-than-expected product transition for the iPhone in the first half of 2013.

JMP Securities

Alex Gauna has been known for a bearish outlook on Apple even in the company's best quarters. Following this week's results, he maintained JMP's "market perform" rating on the company's stock.

"We remain fundamentally neutral on the stock which we see as caught between the merits of its dividend yield that is approaching 2.5% and the risks to forward growth stemming from intensifying levels of competition, management changes, and execution miscues," he said.
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Comments

  • Reply 2 of 100
    jragostajragosta Posts: 10,473member
    Funny how almost every one has Apple listed as 'overweight' or 'outperform'.

    Obviously, if you drive the price down far enough, it's a 'buy'.

    ETA: I just bought 37 more shares at 457.
  • Reply 3 of 100


    No opinion from Chineese investors ? (they have substantial financial means at their disposal ...)

  • Reply 4 of 100


    Why must Apple innovate at the same pace they did?


     


    They are the only ones doing something relevant at consumer-level... even if they innovate 0 in the next few years, they are still undervaluated. What are the others doing? Nothing! just copying and "bigger screens".


    150 billions on cash, 0 debt and the biggest quarter the world has seen (revenue)?


     


    Well... this is what the world gets for putting stupid irrelevant people without knowledge trying to "predict" things. They are losers, no one should listen to them... but they can manipulate every single stock, especially Apple,  because the majority of people are stupid, so if you want to make money you must think like a rock does.


     


    I hate these disgusting creatures, the ones responsible for the current situation. Can you imagine the amount of money some people lost, because of these bastards and their underlings? Hard working people, that thought very well and played the game as it should be played, they lost because of this blatant corruption.


     


    Apple will do great, but there's no room to be nice. If they want 1 trillion, they have to become ruthless and start buying printers just like samsung, and copy everything, monetize software, pollute the world with ads. Otherwise, f*ck the stock and the press and just keep doing your job, cancel dividends, put your army of lawyers against any single rumour "source" and that's it.

  • Reply 5 of 100


    I'm wondering what price they're trying to hit today.  $450? Sooner or later there is going to be a volume spike.

     

  • Reply 6 of 100

    Quote:

    Originally Posted by island hermit View Post


    I'm wondering what price they're trying to hit today.  $450? Sooner or later there is going to be a volume spike.

     



    I am very pleased with having got in for a few more at $458 (and change) this morning.

  • Reply 7 of 100
    rogifanrogifan Posts: 10,669member
    Apple is down 11% and Netflix is up over 40%. You can't make this stuff up. :lol:
  • Reply 8 of 100
    herbapouherbapou Posts: 2,208member

    Quote:

    Originally Posted by pedromartins View Post


    Why must Apple innovate at the same pace they did?


     


    They are the only ones doing something relevant at consumer-level... even if they innovate 0 in the next few years, they are still undervaluated. What are the others doing? Nothing! just copying and "bigger screens".


    150 billions on cash, 0 debt and the biggest quarter the world has seen (revenue)?


     


    Well... this is what the world gets for putting stupid irrelevant people without knowledge trying to "predict" things. They are losers, no one should listen to them... but they can manipulate every single stock, especially Apple,  because the majority of people are stupid, so if you want to make money you must think like a rock does.


     


    I hate these disgusting creatures, the ones responsible for the current situation. Can you imagine the amount of money some people lost, because of these bastards and their underlings? Hard working people, that thought very well and played the game as it should be played, they lost because of this blatant corruption.


     


    Apple will do great, but there's no room to be nice. If they want 1 trillion, they have to become ruthless and start buying printers just like samsung, and copy everything, monetize software, pollute the world with ads. Otherwise, f*ck the stock and the press and just keep doing your job, cancel dividends, put your army of lawyers against any single rumour "source" and that's it.



     


    If Apple dont innovate they are  going to sell less, at lot less.   Margings are going to tank and EPS will keep dropping and the stock price along with it. 


     


    Apple is charging a premium and takes huge margins.  To justify this you absolutly must be cutting hedge. Quality and cutting edge is not optionnal, this is why they focus on very few products and try to come out with the best .   What Apple need the most right now is multiple iphone models do cover different needs and of course innovation across the board in product cycles.  this is just to keep floating at current levels.  To growth they need a new product category.


     


    BTW Apple went from 80% yoy growth to negative yoy, of course the stock is going to tank down the toilet with that. The only thing keeping this from going down to $200 is valuation was already cheap and the 137/share in cash.  Any other sotcks with high PE would have got annilated with a 90% drop with that kind of earnings.

  • Reply 9 of 100

    Quote:

    Originally Posted by anantksundaram View Post


    I am very pleased with having got in for a few more at $458 (and change) this morning.





    I think it's fairly obvious that AAPL is worth a lot more than where it is right now.


     


    Glad to see you were able to get a few.

  • Reply 10 of 100
    herbapouherbapou Posts: 2,208member

    Quote:

    Originally Posted by PhilBoogie View Post







    Define normal


     


     


    Indeed, negavite growth is not normal, it just plain sucks.  And the thing that really enrages me is TC didnt do a single thing for the stock on the call, with the pile cash they add they could have double the dividend to support investors.  With 4% yield, value and income funds would have jump in to counter the carnage of all the growth stocks dumping Apple like its the plege.


     


    Those guys are sitting on billions and are giving themselves huge amount of cash in options.

  • Reply 11 of 100
    So disappointing.

    I predicted 100 Million iPhones sold. Apple only sold 47.8 million.

    I predicted Apple would have $120 BILLION IN REVENUE for its first quarter. But Apple only did a PUNY ALL-TIME RECORD FOR ANY COMPANY IN HISTORY OF ONLY $54.5 BILLION IN REVENUE. What is up with that?

    Apple ONLY had $13.1 BILLION IN PROFIT. Google had $2.9 BILLION in profit in the same quarter. Apple ONLY earned 4.5 times the profit of Google. I expected more more, much more.

    Apple's $13.1 BILLION IN PROFIT also is less than all of Microsoft's $16 BILLION IN REVENUE. What's up with that? Shouldn't Apple's PROFIT ALONE BE GREATER THAN Microsoft's TOTAL REVENUE? After all, the iPhone business alone is larger than all of Microsoft. Apple's profit is only 2.9 times Microsoft's $4.5 BILLION IN PROFIT. I expected more more, much more.

    I predicted Apple's Cash Hoard should be $250 BILLION by now. Yet Apple only has $137 BILLION in Cash. Don't they realize they don't have enough to buy all of Microsoft, Intel, Dell, RIM, Nokia, and Sony put together? Apple must be wasting a lot of money on nonsense expenditures.

    I expected more more more more. So disappointing. Watch Apple's Stock sink. Soon Apple will be losing billions in revenue every quarter. The sky is falling. Apple's gonna die. Apple's gonna die.

    Wahhhh. Wahhhh. Wipe me Mommy.
  • Reply 12 of 100
    quadra 610quadra 610 Posts: 6,741member


    What nobody knows (but the more far-sighted realize) is that 2013 will be the year that Apple, seemingly out of nowhere, reimagines and revolutionizes yet another segment of the tech industry. 


     


    The hilarious part of it all is that no pundit, no analyst, and those unfamiliar with just how strong Apple's fundamentals are, will see it coming. 

  • Reply 13 of 100
    herbapouherbapou Posts: 2,208member

    Quote:

    Originally Posted by jameskatt2 View Post



    So disappointing.



    I predicted 100 Million iPhones sold. Apple only sold 47.8 million.



    I predicted Apple would have $120 BILLION IN REVENUE for its first quarter. But Apple only did a PUNY ALL-TIME RECORD FOR ANY COMPANY IN HISTORY OF ONLY $54.5 BILLION IN REVENUE. What is up with that?



    Apple ONLY had $13.1 BILLION IN PROFIT. Google had $2.9 BILLION in profit in the same quarter. Apple ONLY earned 4.5 times the profit of Google. I expected more more, much more.



    Apple's $13.1 BILLION IN PROFIT also is less than all of Microsoft's $16 BILLION IN REVENUE. What's up with that? Shouldn't Apple's PROFIT ALONE BE GREATER THAN Microsoft's TOTAL REVENUE? After all, the iPhone business alone is larger than all of Microsoft. Apple's profit is only 2.9 times Microsoft's $4.5 BILLION IN PROFIT. I expected more more, much more.



    I predicted Apple's Cash Hoard should be $250 BILLION by now. Yet Apple only has $137 BILLION in Cash. Don't they realize they don't have enough to buy all of Microsoft, Intel, Dell, RIM, Nokia, and Sony put together? Apple must be wasting a lot of money on nonsense expenditures.



    I expected more more more more. So disappointing. Watch Apple's Stock sink. Soon Apple will be losing billions in revenue every quarter. The sky is falling. Apple's gonna die. Apple's gonna die.



    Wahhhh. Wahhhh. Wipe me Mommy.


     


     


    youre obviously have no clue at all on how stocks are price....

  • Reply 14 of 100
    jragostajragosta Posts: 10,473member
    herbapou wrote: »

    Indeed, negavite growth is not normal, it just plain sucks.  And the thing that really enrages me is TC didnt do a single thing for the stock on the call, with the pile cash they add they could have double the dividend to support investors.  With 4% yield, value and income funds would have jump in to counter the carnage of all the growth stocks dumping Apple like its the plege.

    Who's talking about negative growth? When you adjust for the different number of weeks, Apple still had significant growth last quarter.

    And using cash to manipulate stock is foolish. That would tell investors that Apple doesn't have a plan but rather is reacting to every blip in the market. It's far, far better to use the cash for strategic investments and keep a significant reserve. If you feel that the cash is more than you need for your plans, then you distribute it to investors in a measured, planned way. That is, just what Apple is doing. Simply jumping in with a massive dump of cash is ridiculous.

    Now, it might be reasonable for Apple to accelerate their stock buy-back with the cash. Stock buy backs, by their nature, depend on the price of the stock. Apple could easily justify the statement that they were planning to buy $10 B worth of shares over the next year but due to the undervalued stock price they're accelerating that.
  • Reply 15 of 100
    jragostajragosta Posts: 10,473member
    herbapou wrote: »

    youre obviously have no clue at all on how stocks are price....

    That's OK. Neither does Wall Street.

    There's absolutely no rational reason for Apple to be trading at 7 times forward, cash-adjusted P/E and dropping over 10% when they just had a record quarter and beat their guidance (as well as most of the analysts' predictions).
  • Reply 16 of 100
    gatorguygatorguy Posts: 19,275member

    Quote:

    Originally Posted by jragosta View Post





    That's OK. Neither does Wall Street.



    There's absolutely no rational reason for Apple to be trading at 7 times forward, cash-adjusted P/E and dropping over 10% when they just had a record quarter and beat their guidance (as well as most of the analysts' predictions).


    These were the projections:


    http://tech.fortune.cnn.com/tag/quarterly-earnings/

  • Reply 17 of 100

    Quote:

    Originally Posted by Quadra 610 View Post


    What nobody knows (but the more far-sighted realize) is that 2013 will be the year that Apple, seemingly out of nowhere, reimagines and revolutionizes yet another segment of the tech industry. 


     


    The hilarious part of it all is that no pundit, no analyst, and those unfamiliar with just how strong Apple's fundamentals are, will see it coming. 





    Some may think I've put on my rose colored glasses but I agree with you.


     


    http://forums.appleinsider.com/t/155430/apples-jan-23-earnings-conference-call-viewed-as-most-important-in-10-years#post_2257697

  • Reply 18 of 100

    Quote:

    Originally Posted by herbapou View Post


     


    If Apple dont innovate they are  going to sell less, at lot less.   Margings are going to tank and EPS will keep dropping and the stock price along with it. 


     


    Apple is charging a premium and takes huge margins.  To justify this you absolutly must be cutting hedge. Quality and cutting edge is not optionnal, this is why they focus on very few products and try to come out with the best .   What Apple need the most right now is multiple iphone models do cover different needs and of course innovation across the board in product cycles.  this is just to keep floating at current levels.  To growth they need a new product category.


     


    BTW Apple went from 80% yoy growth to negative yoy, of course the stock is going to tank down the toilet with that. The only thing keeping this from going down to $200 is valuation was already cheap and the 137/share in cash.  Any other sotcks with high PE would have got annilated with a 90% drop with that kind of earnings.



    Apple had 8% more profit yoy (13 vs 14 weeks) with all the production problems we already knew.


    They had the biggest yearnings in history.


     


    and you are vomiting this?


     


    Why can't Apple just use a bigger screen and ARMs base chip architecture with 0 innovation, just like everyone else and let the ecosystem and brand power do the rest? They would still sell more highend phones than anyone else, and making the same profit (look at the galaxy line).


     


    Please, don't say such BS.

  • Reply 19 of 100
    stelligentstelligent Posts: 2,680member

    Quote:

    Originally Posted by jragosta View Post



    Funny how almost every one has Apple listed as 'overweight' or 'outperform'.



    Obviously, if you drive the price down far enough, it's a 'buy'.



    ETA: I just bought 37 more shares at 457.




    Is it true that these analysts drove the price down? Most (all?) have been steadfast in publishing price targets of $550 to $750, if not higher.

  • Reply 20 of 100
    stelligentstelligent Posts: 2,680member

    Quote:

    Originally Posted by Quadra 610 View Post


    What nobody knows (but the more far-sighted realize) is that 2013 will be the year that Apple, seemingly out of nowhere, reimagines and revolutionizes yet another segment of the tech industry. 


     


    The hilarious part of it all is that no pundit, no analyst, and those unfamiliar with just how strong Apple's fundamentals are, will see it coming. 



     


    Quote:

    Originally Posted by island hermit View Post




    Some may think I've put on my rose colored glasses but I agree with you.


     


    http://forums.appleinsider.com/t/155430/apples-jan-23-earnings-conference-call-viewed-as-most-important-in-10-years#post_2257697





    Rose-colored or not, some pundits have in fact been predicting such disruptive products (e.g. Munster). Of course, whether it will emerge in 2013 remains to be seen. Remember this - iPod came out in 2001l; iPhone in 2007 and iPad in 2010. There is no pattern to when new product classes emerge. It may take another 6 years.

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