posted
Analysts see opportunity in Apple's sell-off Street bullish as valuation hits a discount compared with past levels
By Rex Crum, MarketWatch Last update: 2:49 p.m. EST Jan. 23, 2008Print E-mail RSS Disable Live Quotes
SAN FRANCISCO (MarketWatch) -- While many investors may now think Apple Inc. is rotten to the core, Wall Street is trying to rally support for the once high-flying stock.
Such was apparent Wednesday, as most of the analysts covering Apple (AAPL:Apple Inc News, chart, profile, more Last: 132.16-23.48-15.09%
2:37pm 01/23/2008
AAPL 132.16, -23.48, -15.1%) renewed their buy calls on the stock, which has now shed more than a third of its value since Christmas and is trading well below the Street's lowest price targets.
By Wednesday afternoon, the iconic computer and electronics maker saw its shares fall more than 17% to $128.67 -- setting the stock's lowest midday level since August of last year -- following a second-quarter forecast that fell short of analysts' estimates and hinted at slower spendingamong U.S. consumers.
Richard Gardner of Citigroup said that "this dramatic decline fully discounts a recession and we would be buyers on weakness" in a note Wednesday.
Apple has long been popular on Wall Street. More than 80% of the analysts covering the stock rate the shares as a buy, according to data from Thomson Financial.
In their reports following the earnings on Wednesday, most of those analysts noted some concerns with Apple's outlook, but maintained an opinion that the company is far from a lost cause and that now is a good time for investors to buy -- in advance of what are believed to be more improvements and additions to the product line this year.
However, some are resetting their expectations for the shares. Several analysts trimmed their price targets, lowering the Street median target price from $215 to $210. Current targets range from a low of $150 to a high of $250, according to Thomson data.
Expectations reset on Apple's shares "We are still positive on the stock," said Shebly Seyrafi of Caris & Co., who cut his rating on Apple's shares to above average from buy, and also lowered his target price to $165 from $225 a share.
Seyrafi justified his moves because of Apple reporting what he called "slowing iPod sales and disappointing notebook sales" in its first quarter, ended Dec. 31. Apple said that it sold 22.1 million iPods, a 5% increase from the same period a year ago, but below most expectations for sales of 25 million units. The notebook sales of 1.34 million units were up by 38% from a year ago, but were basically flat with Apple's 2007 fourth quarter.
However, Seyrafi said investors should take a "12-month horizon" view, and pay particular importance to the company's gross margins as a percentage of sales. Apple is forecasting second-quarter gross margins of 32%, but the analyst estimates those numbers at 35.6%, due to recent shifts toward higher margin Macintosh PCs and more-expensive iPods -- such as the new iPod touch, which costs either $299 or $399. Ben Reitzes of UBS kept his buy rating on the stock, pointing to strong momentum in Mac sales. But he said that slowing iPod sales are a source of concern.
"In short, Apple needs Macs and iPhones to pick up the slack for a maturing iPod category, which could still become more evident over the long term in our view," he wrote to clients. Reitzes trimmed his price target to $200 from $235.
'Apple needs Macs and iPhones to pick up the slack for a maturing iPod category, which could still become more evident over the long term.' — Ben Reitzes, UBS
Few tech stocks rose so much as Apple in 2007, and even in a market that hasn't been kind to any tech company this year, Apple's shares have taken an large amount of punishment.
Since reaching almost $203 a share on Dec. 27, Apple's stock has fallen by almost 38% through the anticipation of and reaction to the Macworld Expo, where Apple Chief Executive Steve Jobs showed off the new MacBook Air ultraportable laptop and a new online movie-rental service, as well as Tuesday's second-quarter forecast. Valuation still a premium, but cheaper Apple shares have long carried a premium over other makers of PCs and consumer electronics. But the recent drop has erased some of that gap, through the stock is still more expensive than most of its peers.
At its current share price, Apple trades about 25 to 26 times estimated earnings for the next four quarters. While that is still above peers such as Dell Inc. (DELL:dell inc com News, chart, profile, more Last: 19.24-1.01-4.99%
2:37pm 01/23/2008
Sponsored by: HPQ 41.43, -1.29, -3.0%) -- which carry price-to-earnings ratios in the mid-teens -- Apple's valuation is still about 35% below its average P/E ratio of 40.5 over the last five years, according to Thomson data.
Bernstein Research analyst Toni Sacconaghi said that the big pullback in Apple's stock makes the company's valuation "much more reasonable" with regards to his target price of $165 a share. He also has a market-perform rating on Apple's stock.
But Sacconaghi added that there is some risk to Apple's sales due to potential weakness in the consumer market, but the stock's current price levels "provide and attractive entry point," and that the company's gross-margin and earnings estimates "appear relatively conservative at this point."
The potential for a drop in consumer spending is likely to play a factor with Apple more so than other PC makers, simply because unlike H-P or Dell, Apple isn't as embedded in the corporate-enterprise market.
But Bear Stearns analyst Andrew Neff said that the breadth of Apple's current and anticipated product offerings puts the company in a better position this year than in 2007. Neff has an outperform rating on Apple's stock; he trimmed his price target on the shares to $220 a share from $233 and called the day's weakness a opportunity for investors.
"Apple is on the cusp of multiple product cycles," Neff commented. "We're actually more comfortable on Apple's drivers due to iPhone shipping, accelerating Mac momentum and digital video, where video rentals [are] just starting."
Rex Crum is a reporter for MarketWatch in San Francisco. MarketWatch reporter Dan Gallagher contributed to this report.
-------------------- "Great Day for Up!"....Dr. Seuss Posts: 3380 | Registered: Mar 2006
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posted
Well, I replaced those shares I sold with ones at $128.00 this morning and I sold them right at close for $139.00. So I finally did it right. (although not enough yet to make up for the losses so far) But, look! It is going up after hours, and I still have those other shares. What is the world coming to?
Jo
-------------------- "Great Day for Up!"....Dr. Seuss Posts: 3380 | Registered: Mar 2006
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quote:Originally posted by Jo4321: Well, I replaced those shares I sold with ones at $128.00 this morning and I sold them right at close for $139.00. So I finally did it right. (although not enough yet to make up for the losses so far) But, look! It is going up after hours, and I still have those other shares. What is the world coming to?
Jo
It's a start Jo!
I'd like to see this get to around 121 before I start taking it seriously. It looks like it's still trying to shake off it's recent mild concussion.
Posts: 251 | From: WestCoast | Registered: Oct 2006
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And thanks again, Ace, for giving me the heads up on Lionmaster. I took a look at some of his recent picks and bought some JMBA in premarket at $2.55. Sold it later at $2.85.
I guess every little bit helps, but geez it's gonna be a long road. I finally did today what I've been avoiding doing for about a month and a half: I updated my total investments spreadsheet that I keep for hubby and me(this includes our 401k's, mutual funds, stocks). All told we are down $88,000 since October 9, 2007 which was our highest point. Down about $30,000 from where we were this time last January. I still cannot believe the speed in which I saw my paper profits evaporate. I MEAN THIS WAS JUST SINCE OCTOBER 9TH PEOPLE!!! Ironically, I started a part-time job on OCTOBER 8th. I pretty much lost 7 times my frickin' yearly salary since then.
The only silver lining is that I am still SLIGHTLY "green" from when I started trading, but that was nearly two years ago now. I feel like I've wasted two years of my life trying to learn this stuff only to be back nearly where I started. DAMN you FRPT!! DAMN you, PAY, CROX, JSDA, MON, OSK, EPAX AND EVERY OTHER FRICKIN' STOCK I BOUGHT OR SOLD AT THE EXACT WRONG TIME!!!!
Sorry this has nothing to do with APPL (except that my choice of buying APPL contributed to some of my losses) But, it's nice to vent amoung cyber-friends.
Jo
Oh, and by the way, short GME and buy MON (if you know what I mean LOL)
-------------------- "Great Day for Up!"....Dr. Seuss Posts: 3380 | Registered: Mar 2006
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MON got up to a high of about $3.50 more than I sold it for.
Can I ever catch a break?
MON had blow out number released before the market crashed! This dip was a great buying opportunity!
If sold for any profit you shouldn't be beating yourself up for selling early! In this market you got to take profits quicker than in a full blown bull rally! And if you sold for a loss.....just be glad your not this guy on the day after the global sell off on sunday/MLK day
posted
LOL, I am that guy. Minus the bad language and on a smaller scale.
I made only a teeny tiny profit on MON. It was sheer luck though because I had a stop loss in that day the market had those wild swings. I cancelled it that morning, thank goodness, or I'm sure it would have filled at the LOD of $93.22.
Because of that scare, as soon as I was in the green, I sold it.
-------------------- "Great Day for Up!"....Dr. Seuss Posts: 3380 | Registered: Mar 2006
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posted
Apple up in After-Hours - Makes Positive Comments at Conference 4:57 p.m. 02/27/2008 Provided by
Boston, Feb 27, 2008 (MidnightTrader via COMTEX) -- AAPL is generating firm buy action through the first hour of night trade, jumping nearly 3% on reports it made some bullish comments at an investor conference.
Briefing.com reported tonight the company is at a Goldman Sachs conference pointing to positive news in the Apple TV category, Macbook Air and strong iPhone demand.
posted
APPL been climbing slow and steady for a while now. Minor setback yesterday. I think we are headed back to the 160's by mid April. Am I the only one still holding this?
-------------------- Slim Posts: 157 | From: EDINBURG, TEXAS USA | Registered: Feb 2004
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posted
This is one of the safest investment with a large guaranteed return. Apple cant lose money right now... I see it going back up to $200 with in six months!
Posts: 850 | Registered: Jul 2005
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