Citing 'increasingly hostile' competition, Needham cuts Apple Inc. price target to $595
Investment firm Needham & Company cut its price target for shares of Apple from $710 to $595 on Monday, citing growing competition in both of the company's key markets: phones and tablets.
Needham's price target for AAPL stock has grown 153 percent over the last four years.
Analyst Charlie Wolf cited "increasingly hostile" competition, which led him to reduce his estimated fair value for all of Apple's major operating segments. The largest hit came in Apple's Mac business, where Wolf cut 42.3 percent of its value, citing a transition in the PC market to tablets.
The analyst also trimmed the value of Apple's iPad business by 37.2 percent, largely due to lower margins on the iPad mini. And he cut the projected value of the iPhone business by 15.4 percent, citing more competition in the global smartphone space.
Wolf has a different approach to than his colleagues, as he will only re-evaluate a company's price target twice per year. As such, his previous prediction of $710 has remained steady since February, when it was also reduced from $750.
Wolf's "Apple Valuation" model assigns a value to each of the company's businesses, with each weighted based on how important they are to the company. Those values are then added up to reach a total share price target.
In his latest model, the iPhone accounts for $261.06 of the $595 price target, or 43.9 percent. iTunes, software and services are the second most important part of Apple's valuation, in Wolf's eyes: He's given that business segment a value of $76.83 per share, representing 12.9 percent of the projected value.
The iPad is the third most valuable segment, at $61.58, or 10.3 percent of the price target. Also built in to Wolf's model is Apple's excess cash, which he pegs at $140.32 of his price target, or 23.6 percent.
A lot can and change in six months, and as a result Wolf told investors he expects to revise his projected valuation for AAPL shares once again come February 2014. He said those revisions will depend on the acceptance of new iPhones and iPads that Apple is expected to introduce this fall.
Needham's price target for AAPL stock has grown 153 percent over the last four years.
Analyst Charlie Wolf cited "increasingly hostile" competition, which led him to reduce his estimated fair value for all of Apple's major operating segments. The largest hit came in Apple's Mac business, where Wolf cut 42.3 percent of its value, citing a transition in the PC market to tablets.
The analyst also trimmed the value of Apple's iPad business by 37.2 percent, largely due to lower margins on the iPad mini. And he cut the projected value of the iPhone business by 15.4 percent, citing more competition in the global smartphone space.
Wolf has a different approach to than his colleagues, as he will only re-evaluate a company's price target twice per year. As such, his previous prediction of $710 has remained steady since February, when it was also reduced from $750.
Wolf's "Apple Valuation" model assigns a value to each of the company's businesses, with each weighted based on how important they are to the company. Those values are then added up to reach a total share price target.
In his latest model, the iPhone accounts for $261.06 of the $595 price target, or 43.9 percent. iTunes, software and services are the second most important part of Apple's valuation, in Wolf's eyes: He's given that business segment a value of $76.83 per share, representing 12.9 percent of the projected value.
The iPad is the third most valuable segment, at $61.58, or 10.3 percent of the price target. Also built in to Wolf's model is Apple's excess cash, which he pegs at $140.32 of his price target, or 23.6 percent.
A lot can and change in six months, and as a result Wolf told investors he expects to revise his projected valuation for AAPL shares once again come February 2014. He said those revisions will depend on the acceptance of new iPhones and iPads that Apple is expected to introduce this fall.
Comments
Too good these Anal yeast cut price target when stock is down
I remember this company pumping stocks like LDK big time at higher 50s. Look at LDK now
Why downgrade now? This Anal could have been smarter to keep his mouth shut and see Apple touching 700 again rather than to downgrade after the steep fall. Yes 700 again
That would explain the jump in AAPL today... Ah, analysts...
Personally, it is a little depressing to keep hearing these reports on how the Mac is becoming an endangered species. I find a nice big screen so much more enjoyable to use than a tablet. Mediocre wins again.
What "Hostile" competition? If he means Apple having to compete with the plethora of useless PC and tablet garbage that has been out there, how is that "hostile"? It's business as usual for Apple. Make great quality products and customer loyalty will still be there. I have zero desire to save a few bucks and buy the crap that out there knowing it will be just in months or hamper my productivity. Are analysts still that clueless as to why Apple is continuously successful?
"Hostile" in that they pay off government organizations to get their way, yeah.
You mean "guesses" instead of "reports." The Mac won't die anytime soon.
I will agree that $595 for the stock price over the next year is REASONABLE to expect.
That's still about a 30% increase in share price, plus dividends. Nothing wrong with a 30% increase in the next year, plus dividends. I'll take that over a lot of other stocks.
I do think that Apple stock was overbought when it went up to $700 a share. At least it's not trading at a excessively high P/E ratio.
Quote:
Originally Posted by LordJohnWhorfin
That would explain the jump in AAPL today... Ah, analysts...
It's also because of the increased media attention to the forthcoming product announcements. Apple has only really made one new h/w product announcement in the MacBook Airs. Obvioulsy they had other products they've announced, but those are either s/w with Logic X or their 802.11ac products. Other than that, the end of this year is going to have a lot of new products which should be a good Dec quarter if they can get parts to spit out lots of product.
I wish and hope Apple will do a surprise and release a large screen iPhone to shut people up, but for some reason, I think we might have to wait at least another quarter or two, hopefully not another full year.
Quote:
Originally Posted by LordJohnWhorfin
That would explain the jump in AAPL today... Ah, analysts...
Maybe if they cut it again to $300 it'll go to $600.
Quote:
Originally Posted by helicopterben
Too good these Anal yeast cut price target when stock is down
I remember this company pumping stocks like LDK big time at higher 50s. Look at LDK now
Why downgrade now? This Anal could have been smarter to keep his mouth shut and see Apple touching 700 again rather than to downgrade after the steep fall. Yes 700 again
Analyst - Analist - Anal Yeast - Anal List - A Ney List...
Totally aside from whether or not I support Apple products (I do, happily), if AAPL hits $595 again, I'll probably bail, simply because as an individual investor, I no longer have the stomach for the roller coaster manipulation. I'll take my 600% gain and call it a win.
Business analysis is important. That is how investors make their decisions. I just think this analyst should have kept it at at least $710.
Quote:
Originally Posted by GQB
Totally aside from whether or not I support Apple products (I do, happily), if AAPL hits $595 again, I'll probably bail, simply because as an individual investor, I no longer have the stomach for the roller coaster manipulation. I'll take my 600% gain and call it a win.
Do what you must. I'm sticking with AAPL because the company's stock buyback has thinned some of this manipulation, however stocks are generally more volatile than savings accounts or bonds, for example. Volatility is what makes it more attractive as an investment choice.
Quote:
Originally Posted by sflocal
What "Hostile" competition? If he means Apple having to compete with the plethora of useless PC and tablet garbage that has been out there, how is that "hostile"?
The guy's been watching too many Microsoft RT vs iPad commercials... He also took notes when Faux News was doing their fiction reporting about Apple's board getting all over Tim Cook's ass for not shitting out any "innovation." Then there's the federal judge who has his robe in a knot over the price-fixing of books...
Finally, there are any number of hostile analysts that just can't get Apple to just die die die dammit!!!!
Has any of these analysts actually used an Android tablet or smartphone? Has anyone? There is NO competition. There is no comparison and Apple is only getting started. If it weren't for Apple (again), these industries would not even exist.
Quote:
Originally Posted by GQB
Totally aside from whether or not I support Apple products (I do, happily), if AAPL hits $595 again, I'll probably bail, simply because as an individual investor, I no longer have the stomach for the roller coaster manipulation. I'll take my 600% gain and call it a win.
If you must... but I'd recommend keeping half your gain on APPL it's going to go somewhere big between now and April Fools day.