Wells Fargo says low expectations for Apple's Sept. 9 event could work to stock's advantage

Posted:
in AAPL Investors edited September 2015
There's a feeling on Wall Street that everything is already known and expected heading into Apple's "Hey Siri" event, investment firm Wells Fargo said on Friday, suggesting that any potential surprises could help push the company's stock higher.




Analyst Maynard Um said that even investors who are bullish on Apple have "low expectations" for the company's Sept. 9 event, where it is widely expected to introduce its new "iPhone 6s" series, as well as a next-generation Apple TV.

To him, any surprise from Apple could be to the upside, making it a good time for investors to buy in. Um has reiterated his "outperform" rating for shares of AAPL, as he sees a more attractive risk/reward for investors following a recent selloff.
"We note low expectations for the event, even from Apple bulls and think any potential surprise could be to the upside." - Maynard Um, Wells Fargo
Um had been bearish on Apple until late last month, when he declared that losses seen by the company's stock were an overreaction to the market. With continued strong sales in China, the analyst said Apple's losses created a buying opportunity for investors who might be on the fence.

For the so-called "iPhone 6s," Um expects what has generally been rumored for the device, including Force Touch input, 2 gigabytes of RAM, a faster "A9" processor, and improved cameras.

He's also pleased that the new iPhone is expected to once again come in capacities of 16, 64, and 128 gigabytes. He believes the entry-level 16-gigabyte model helps to push models to the pricier 64-gigabyte model for just $100 more, improving the device's average selling price and Apple's margins.

Um acknowledged that S-cycle iPhone upgrades typically do not show as much growth as well as Apple's full-fledged redesigns. But he also believes that those concerns about tough comparisons in the December quarter are already priced into the company's shares.

"We believe the stock has been reflecting this challenge and see the recent selloff as offering a more attractive risk/reward," Um wrote.

As for the new Apple TV and its rumored price of $149, the analyst believes Apple must demonstrate "significant innovation in its next-generation model to justify the price premium. The current, third-generation Apple TV debuted at $99, but is currently sold for $69.

Wells Fargo has maintained its "outperform" rating for AAPL stock with a "valuation range" of $125 to $135.

Comments

  • Reply 1 of 16
    jungmarkjungmark Posts: 6,705member
    "Significant innovation?" Eff you, analysts. What does that even mean? Is there an innovation scale? Should Apple "innovate" faster? Spoken like a true failed businessman.
  • Reply 2 of 16
    Low expectations? WF clearly isn't reading DF or AI.
  • Reply 3 of 16

    Is "financial analyst" still a real job? Do people actually get paid to make these third-grade predictions? 

  • Reply 4 of 16
    Quote:
    Originally Posted by sog35 View Post

     

    There are low expectations for Apple everywhere.

     

    Most analysist think FY2016 will show small or no revenue growth.  Most are targeting 5-7% revenue growth only.

     

    I think they are greatly mistaken.  The growth in China is just ramping up as LTE is quickly spreading across China.  Apple will continue to steal share from Samsung as Galaxy S5 and S4 users will become eligible for upgrade.

     

    Analysist are predicting 0-7% revenue growth.

    I'm predicting 10-15% revenue growth for FY2016.

     

    I love these low expectations from Wall Street instead of their unrealistic expectations earlier this year.


    I was just glancing at an S&P stock report (one of the better, more sober ones in the business, generally speaking). They model 28% revenue growth in FY2015 for Apple, and 4.4% (no, that's not a typo!) in FY2016.

     

    Yet, their "12-month price target"? $150.

     

    Can you imagine how the stock will do if actuals for 2016 comfortably beat -- as they will -- such ludicrously low expectations?

  • Reply 5 of 16
    fallenjtfallenjt Posts: 3,976member
    I was just glancing at an S&P stock report (one of the better, more sober ones in the business, generally speaking). They model 28% revenue growth in FY2015 for Apple, and 4.4% (no, that's not a typo!) in FY2016.

    Yet, their "12-month price target"? $150.

    Can you imagine how the stock will do if actuals for 2016 comfortably beat -- as they will -- such ludicrously low expectations?
    WS want to suppress AAPL at $115-$125 until Apple car is announced.
  • Reply 6 of 16
    wizard69wizard69 Posts: 12,831member
    sog35 wrote: »
    they use vague terms like "significant innovation" so they can twist the facts to fit their agenda.
    Most certainly but then you have to wonder why Appleinsider puts so much stress on these reports. Might it be to create massive amounts of posts that lash out at the reports?
    Its total and utter bullshit.  Apple is dominating the most profitable sector in the universe (mobile hardware) with 92% of profits yet Wall Street still is gloom.  Whatever.  They will pay for their lack of vision.

    Point of fact here, when you have 92% or whatever of the profits in an industry that just means there is plenty of opportunity for others to cash in. Don't dismiss the possibility that others can leverage their way into those profits. It would certainly require a leadership change at one or more competitive companies to do so but that isn't an impossibility. The point is Apples profit share isn't guaranteed at all, to keep it they need to maintain desirable products.
  • Reply 7 of 16
    Analysts are often in the pocket of other interests, so I take everything they say with a grain of salt. These are the same people who, by and large, were saying how great Enron was - as that company was literally running on fumes. But when I look at the roster for next weeks event, I don't find a lot to get excited about. The "S" iPhones are, typically, refinements of the previous year's models. I am eager about iOS 9, but more towards the bugs it hopefully fixes. The new Apple TV is way overdue, Apple has been asleep at the switch on this one. Sounds like it'll be cool...finally get an app store, games look likely, and even though I wouldn't buy in, a streaming subscription TV service would be pretty cool. Yet, nothing here really blows my socks off. But this WF analyst could easily be a short seller trying to drive the stock down just to increase the value of his own position. Analysts really aren't objective, everything they do is in the name of making money based on their own holdings. And this works very well, provided your money is invested with their firm.
  • Reply 8 of 16
    rob53rob53 Posts: 2,051member

    I hate quoting Apple-hater Fortune, http://fortune.com/2015/09/04/apple-tv-everywhere-share/, but for once they've presented an article and chart that blows all the other streaming boxes out of the ocean (not just simple water). Of course, this is only for paid usage, not the free things all of them use. Isn't this Apple's business model? They don't get into a business where there isn't any money to be made, at least by non-advertising means. If Apple provides an AppleTV that is more than just the simply box it is now, then it's worth the $149+ price.

     

  • Reply 9 of 16
    Quote:

    Originally Posted by sog35 View Post

     

     

    If you understand the Apple ecosystem you would see no competitor is going to steal profits from Apple for a very long time.  Add to the fact that Apple only has about 15% of the global market share.  That alone should illustrate that Apple has huge amounts of growth.

     

     

     

    And who will this be?  Microsoft threw billions into mobile and lost.  Google threw billions and lost.  Samsung lost.  Who the hell is left that has the pockets to build an ecosystem that can overtake Apple?  Xiaomi?  HTC?  LG?  Hell no.  None of those companies have the resources and talent to build an ecosystem to defeat Apple.  And thats what it comes down to.  And cheap piece of shit Chinese brand can build hardware that looks similiar to Apple.  But they can't duplicate the ecosystem.

     

    So its not an impossibility that someone takes away profits from Apple in the near future?  Its also not impossible that I win the lottery 5 times in a row.  That does not mean its likely or even reasonable.

     

     

     

    Again the desirable product that is at the heart of Apple is the ECOSYSTEM.  No competitor can overtake that for at least 5-10 years.  It has taken Apple over a decade and TENS OF BILLIONS of dollars to build its current ecosystem.  And you think a company will come out of the blue and destroy that?

     

    Apple's profit share isn't guaranteed.  I mean WTF.  Who's profit share IS GUARANTEED?  Google?  Netflix? Amazon? Tesla?  Microsoft? Walmart?  Are you telling me their profits are guaranteed?

     

    What you are spewing is the basic Wall Street bullshit to minimize the success of Apple.  For over a decade Wall Street has spewing that Apple can't sustain their profit share in hardware first with the iPod.  And Apple keeps GROWING profits with new products and expanding into new industries.


     

    OK, I'm just thinking out loud...not trying to hate on anyone here.  Just pretend along with me for a second...

     

    Google Play is a fairly decent storefront, but all their devices suck.  That's why their ecosystem sucks.  Right now, it isn't even a competitor.  However, if Google were to open Play to other devices, effectively making Play its own platform but freeing it from the lousy hardware, that would be a big competitive threat to Apple.

     

    Clearly, this is speculative, and I only mention this for the sake of argument.  I don't disagree with you, I'm just playing devil's advocate here.  Amazon may make a better example than Play, but my point is that there are ways Apple's ecosystem could be unseated...but they're in the amoeba stage right now and no one knows if they'll ever get past that point.

  • Reply 10 of 16

    Banks almost destroyed our economy and have learned nothing since.

     

    Who cares what a bank thinks?

  • Reply 11 of 16
    Quote:

    Originally Posted by sog35 View Post

     

     

    Google Play is decent.  But why would someone choose Google Play over Apple's App store?  Apple usually gets apps first and get the best apps.  And this isn't changing anytime soon since Apple's App store generates much more revenue than the Google Play store.

     

    But the App store really is only one pillar of the Apple ecosystem.  

     

    Another pillar is the OS.  iOS is superior to Android.  It is safer and easier to get updates.  Its easier to use.

    Another pillar is functionality between Apple products.  Airplay, Handoff, ect.  You just can't get that on other devices without some compromises.

     

    Another pillar is your music/movie/app libraries.  Who wants to switch off of iOS and rebuy their entire library again?

    Another pillar is Apple's customer service.  Top rated customer service.  Real stores for people to talk to real people.  If your Samsung phone starts acting up you need to ship it to some unknown factory.  With Apple you can visit an Apple store.

     

    Another pillar is services.  AppleMusic, AppleTV, Maps, TouchID, ApplePay, HomeKit, HealthKit, ect, ect, ect.

     

    Many of these things Google is trying to duplicate.  But they will never be able to create a better ecosystem than Apple for one simple fact:

     

    Google's life blood is collecting data to sell ads.  Apple's life blood is to make the best products/services/software to satisfy the customer. Google's need to sell ads will always compromise their ability to give the consumer what they truly want.

     

    IMO the only company that has a chance to take down Apple's ecosystem is Microsoft.  But they have failed so much in mobile I think they have basically cut their losses and threw in the white towel.


     

    I agree iOS is superior to Android.  I bought a Nexus 7 a few years ago just to fsck with, it's annoying.  Android 5 is no better.  And updates are a total mess.  But remove Android from the equation, and make Google Play a service, or Amazon's offerings.  Once they mature, they might pose a threat.  Apple copies google, google copies Apple, MS copies them all...let's just table that one for now.  Competition is generally good for consumers, and would make better Apple products as well.  That's my only point here.  You're right, Google is and always been an advertising company, and that won't lead to the best products but it could lead to the least expensive ones.  I'm not saying I'd buy them, but many people just look at price and a "good enough" set of features.  In all this coal of a feature set, there will be an occasional diamond that will be replicated, and consumers of all flavors win.  Apple can be the best while still benefiting from Google, MS, Amazon, etc.  We don't need one and only one portal to digital content, in fact, that would be very, very bad.

     

    Microsoft has all their cars lined up properly, but it remains to be seen which ones have gas in them and which ones do not.  I think they have more to offer the world than Google though, so I don't wish them ill will.

  • Reply 12 of 16

    It's interesting to consider the fact that Tim Cook probably knows almost exactly how many iPhones they'll sell in the next few months, because they typically sell everything they can make for a while at the beginning. Until they catch up with demand, it's all about the logistics of getting them made and into customers' hands. I suspect that he could already announce the earnings for the July-September quarter with reasonable accuracy.

     

    Also, anybody here who missed Horace Dediu's excellent recent article about the Services division should really check it out:

    http://www.asymco.com/2015/08/26/much-bigger-than-hollywood/

     

    Apple's Services division's billing is already higher than the entire global box office's gross revenues!

  • Reply 13 of 16
    Low expectations for Apple, which happens to be gaining market share without sacrificing profits. High expectations for Samsung, which happens to be losing market share while sacrificing profits. Hmmm.......
  • Reply 14 of 16
    realisticrealistic Posts: 1,141member
    Quote:

    Originally Posted by dtrace View Post

     

     

    OK, I'm just thinking out loud...not trying to hate on anyone here.  Just pretend along with me for a second...

     

    Google Play is a fairly decent storefront, but all their devices suck.  That's why their ecosystem sucks.  Right now, it isn't even a competitor.  However, if Google were to open Play to other devices, effectively making Play its own platform but freeing it from the lousy hardware, that would be a big competitive threat to Apple.

     

    Clearly, this is speculative, and I only mention this for the sake of argument.  I don't disagree with you, I'm just playing devil's advocate here.  Amazon may make a better example than Play, but my point is that there are ways Apple's ecosystem could be unseated...but they're in the amoeba stage right now and no one knows if they'll ever get past that point.


    What other devices could Google open Play to that have any relevant marketshare?

  • Reply 15 of 16
    Proper understatement of Wall Street's failure to understand geeks and the tech industry. They still don't get unboxing, keynotes. A couple of things describing how close we feel to the processes of tech and development.
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