Analyst gives Apple a boost
Eight months ago, Morgan Stanley and RBC Capital both downgraded Apple (AAPL), triggering the company's worst selloff in eight years, a 23-point drop that lopped nearly $18 billion off its market cap.
RBC's Mike Abramsky reversed his position last month, raising his price target for Apple from $95 to $165.
On Tuesday Morgan Stanley's Kathryn Huberty followed suit, raising her target from $105 to $180 and sparking a rally that lifted Apple's stock price 8.28 points (6.67%), to close at $130.78 a share.
Like most Apple analysts, Huberty expects the company to introduce a new iPhone this summer and to cut its prices on existing models — and she makes a strong case that the resulting revenue spike will offset any slowdown in Apple's Mac and iPod business.
But the most interesting part of her report to clients is the fresh look she takes at the mobile Internet market — a market she describes as "one of the biggest opportunities in the history of the technology industry."
Among her findings:
- The iPhone has already dramatically changed the behavior of mobile device users
- Its ultimate target are the 4.1 billion people worldwide currently using cell phones
- The opportunity to connect those users to the Internet is arguably 40 times the opportunity to connect 100 million PCs to the Internet in the 1990s
- Apple is emerging as the "clear leader" in the race to get those users connected.
Accompanying her report are some particularly well-designed charts. Our favorite is the one that shows how Apple has changed user behavior:
The expanded slices in the upper left-hand quadrant of the pie chart correspond roughly with our own experience — without, of course, all that game playing.
See also:
It's a disgrace that she is still an analyst at Morgan Stanley. I'm not certain, though, if it's a bigger travesty that the market puts any credence in her reports
Realistically, the rally could be better attributed to buzz surrounding new iPhones/iPod Touches, bankruptcy filing of Psystar, and increased consumer confidence. The rest of the market was rebounding on the consumer confidence data, and Apple is considered to be particularly susceptible to consumer whim.
Analysts by the very nature of their jobs should anticipate future trends. The downgrades on Apple by RBC and MS 8 months ago have had a real impact in the practical world of investment portfolios held by investors. They should be held accountable for their analysis and pronouncements which in hindsight have been horribly wrong.
$180 from $105? Shouldn’t the question be how she had such bearish opinions of AAPL in the first place, and what has changed between her last downgrade and this upgrade?
Specifically, she downgraded the stock back in September when it was sitting at $128.24 purely as a “the sky is falling” call. All of the iPhone specific macro factors that make her bullish now were in place then.
Now it’s a great buy, due to grow 70% from her previous target of $105?
I guess the data that she chose to ignore in September is now worth factoring in late May?
Honestly, other than providing kindling wood for short-term momentum plays, I am not sure what purpose most analysts serve.
They certainly aren’t held accountable for being right or even well-reasoned in their analysis.
For a more reasoned view of Apple’s prospects, check out:
Apple Earnings: Why NO news is Good News
Regards,
Mark
Did Katy Huberty just wake up and finally see the light? Doubt it. Can you say, "stock manipulation," bigtime. Although I think Apple is grossly undervalued, why would anymore trust anything Huberty says? Her profit and earnings numbers have consistently been so far off reality, it's amazing she still has a job. And, like most of her compatriot anals, she still doesn't understand the savings vault the deferred earnings from iPhone has been building. Quarter after quarter, few of these "experts" are ever close to estimating the difference between GAAP and non-GAAP earnings. Like weather forecasters, it seems like most of their job is guessing (and repeating what the others say), and then explaining afterward why they were wrong. The real story should be why anyone would actually believe what Huberty says. Phil, why not do some actually work? Track Morgan Stanley's sales and purchases of Apple stock and see how they correspond to Huberty's upgrades and downgrades. That might be a story. It's apparent how people like Bernie Madoff can succeed with their scams when you look at how significantly someone like Huberty, who is consistently wrong in predicting Apple's earnings, can influence the value of the stock.
" I look at this consumer confidence number as a good reason to sell. Unemployment is still going up, housing still falling at record levels, and Oil keeps marching up taking more money from an already taxed and scared consumer. Not a good time to be buying any stock in my opinion unless it’s for a trade."
I disagree. The stock market slide hit its low around 2-3 months ago. The market has been up since then. The consumer spending report showed spending is up for the first time and housing prices have bottomed out as well. Two or three months ago was the time to buy, but it's certainly not too late to get in before it all turns around. If you wait until it's a for sure thing then you have waited too long and missed the boat.
"$500/share in two years?"
Let's say a good $250/share.
And $60 billion revenue/year.
For a $15 billion profit/year.
Huberty manipulates this stock way too much. Downgrades it so all her mates can buy it cheap – by quoting way too low targets – then raises it way up so they can ride the escalator and then will drop it again around WWDC. All her mates get out and she will start the cycle again.
$500/share in two years?
Doubt it. If this was 1999 sure. There are still a lot of head winds out there. I look at this consumer confidence number as a good reason to sell. Unemployment is still going up, housing still falling at record levels, and Oil keeps marching up taking more money from an already taxed and scared consumer. Not a good time to be buying any stock in my opinion unless it's for a trade.
I think the comment that one reader posted is worth looking into. He stated that one should look at Morgan's own portfolio and examine whether it's trading pattern parallels it's analyst recomendations… Shades of what the late Richard Ney had to say about Wall Street…!!