Kaufman's Wu changes tune, ups Apple target 26%
Less than three weeks after sounding a bearish note on Apple (AAPL) by dropping the stock from his firm's "Focus List," Kaufman Bros. analyst Shaw Wu turned around Monday and raised his price target to $152 a share, up from $120.
With Apple scheduled to release its fiscal Q2 earnings report on April 22, many analysts are taking another look at the stock — and most seem to like what they see.
Last week, Barclays Capital’s Ben Reitzes also raised his price target 26% — to $143 from $113. His move followed Credit Suisse's Bill Shope, who rated Apple "outperform" with a target price of $133; and Canaccord Adams' Peter Misek, who called the stock a "speculative buy" with a $143 target.
[UPDATE: Caris & Co.'s Robert Cihra also raised his price target Monday, to $150 from $120; he thinks the iPhone and the App Store may still be under appreciated by investors.]
In his report to clients, Wu argues that even though Apple has outperformed the indexes — up 45% since late November vs. 20% for the NASDAQ and 7% for the S&P 500 — there is room for upside growth. As investors gain confidence, he writes, Apple shares may move closer to their traditional multiples of 20 to 25 times earnings.
Wu cites several near-term "catalysts" to justify his optimism:
- The World Wide Developers Conference in June, where he expects Apple to release the new iPhone operating system (OS 3.0) and to unveil new iPhone hardware (presumably for release later this summer)
- Improving sales of Apple's flagship computer line, thanks to the recent refresh of its desktop machines (iMac, Mac mini, and Mac Pro) and the upcoming launch of Snow Leopard, the latest major revision of Mac OS X.
- A wild card: "The potential for a new form factor, perhaps Apple's answer to the netbook, with a large screen iPod touch-Mac hybrid."
Wu also issued something rare for an analyst: a mea culpa (albeit one couched in "arguablies"). Referring to his March 24 report on Apple, he writes:
"We had arguably been a bit defensive with the stock over $107, taking it off our Focus List given we are arguably still in a bear market and investors not willing to pay more than 15x for quality hardware names. However, it appears that investor sentiment has turned a bit more constructive and willing to pay for quality names as we have seen with Apple, Research in Motion, Google, and Amazon."
See also:
A year ago in March, PED write a good article about how some analysts are still confused by Apple's deferred revenues on iPhones, and sundry other items. PED even quoted Shaw Wu who stated he was still somewhat confused.
Clearly, Shaw is still confused, as he wants to apply "traditional multiples" to Apple's earnings, when Apple's earnings have changed. Apple's traditional sales model was pretty simple, sell it, book it. Since the release of the iPhone, Apple's sales model has changed. It's no longer sell it, book it; it's now sell it, book a little, and defer the rest. Given Apple's huge deferral of iPhone revenues, which are in the bank and on the balance sheet, that would strongly justify using a higher multiple than the "traditional multiples" that Shaw is talking about. Clearly, he still is confused by Apple's deferred revenues.
Here's a question for PED since I don't have Shaw's research note. Does Shaw make any comment about Apple's deferred revenues? Does he even mention non-GAAP figures?
We've already seen Ben Reitzes of Barclay's finally start to use non-GAAP figures, starting last week. The question is, what's taking these so-called analysts so long to figure this out? It's been over 2 years since Apple announced the accounting methodology change!
ex ped: Wu's research report today does not mention deferred iPhone revenue or make any distinction between GAAP and non-GAAP numbers.
If someone, arguably, cannot write a coherent sentence, then it's arguable that we should just ignore whatever gibberish they write!
It must be April? Shaw Wu did the same thing last year when he worked for AmTech Research. Downgraded AAPL 4/22, realized he made a bad call and upgraded 2 weeks later.
So i guess the moral of the story is to buy on Shaw Wu's and Mike Abramsky's downgrades.
But Mike Abramsky of RBC said AAPL is not worth more than $70!
It looks analysts, at least Wu, can only follow the market, not to lead the market. Sigh, who would pay money and time to read their reports?
Folks, you should be happy at moronic [too inept to be calculating] analysts. You KNOW Apple will be up in the medium-term, so all these guys do is give you buying opportunities. I recently bought more at 87 (and it even dropped lower than that). The economy will get better, Apple will sell well, release newer products and continue to be successful. So buy, sit back for a couple of years and enjoy. If you're a day-trader, you knew the risk getting in — for any stock, much less one as visible and subject to "stories" as this one. For the rest of us, avoid the anger, listen to some music, read a book.
Just based on this article, I would be reluctant to follow Mr. Wu. He waits until the stock is at a 9 m9nth low to remove the stock from a "focus" list (which I would imagine to be a strong buy list), thereby missing the a nearly 30 percent recovery in the stock. And now that most people are saying the near term rebound has topped out Mr. Wu is now recommending that his clients get in the stock again. My comment to Mr. Wu is "way to whipsaw your followers".
$150? No way you should sell at $150 unless maybe we go through another round of bank failures, etc… It's going well over $200 just to get to the point where it's fairly valued. They are going to take Microsoft's market from them, just sit back and watch it happen. Apple already has taken two thirds of the most profitable over $1000 PC market, they are planning to take the cheaper market in their good time.
Why else do you think Microsoft would be targeting them so heavily? Apple have already taken the windows mobile market from Microsoft and made it an embarrassment. Microsoft tried to compete with an MP3 player, and that failed miserably.
I think Apple will have an answer to the 'netbook' which is already a problem for Microsoft (can't run Vista or Win7) and yet it accounts for a phenomenal share of all (non-apple) PC purchases.
Nice work, Shaw, to increase the target price after your last target price was conveniently achieved.
Maybe you can also use your magical rearview mirror to predict for me who won last year's World Series.
Shawn Wu is just plain STUPID..Doesn't have a clue at what he is saying…People like him have hurt APPLE the past 14 months. Put muzzle on the clown.
KenC, PED –
I find analysts' misunderstanding of non-GAAP earnings process truly amazing. For one, it's not like Apple is the only company to recognize earnings this way (I work for a small-cap tech that also does). Isn't it their job to actually know these models?
But it gets worse when non-professional bloggers (Andy Zaky, etc) keep pounding the point quarter after quarter, and analysts *still* have no clue. Then they come on the earnings call at Apple and ask Peter Oppenheimer the same dumb question: "Oooh… What makes you so confident that you will get all this revenue from iPhones in the next quarter?" Because they've already been sold, silly.
Let's listen in on the upcoming earnings call and hear the same things again.