Yesterday was a good day for Apple (AAPL) with the annual Macworld Expo in full swing, but does the hype overshadow consumer weakness and questions about first-half guidance?
Analysts predict a modest boost from a round of new Macs and a peek at Snow Leopard, Apple's latest operating system, and a few were encouraged by Monday's health update from Steve Jobs. Analysts at Kaufman Bros. said that Phil Schiller's keynote at the event will be a positive catalyst, and new products could "perhaps accelerate its strong Mac momentum." Yesterday Oppenheimer upgraded Apple following a Dec. 17 downgrade on uncertainty over Jobs's health. Apparently his announcement that he's suffering from a "hormone imbalance" gave analysts enough information to restore faith in management's continuity.
Most agree there's still upside for Apple, but is the near term that is still unclear. Kaufman's Shawn Wu says Apple's Mac OS X operating system that powers Macs and iPhones saw faster market share gains in December, which is an obvious long-term positive. But how does that stack up against, for example, Best Buy's (BBY) announcement it is selling refurbished iPhones for $50 less than new ones, and the ongoing wait for a cheaper version of the iPhone?
Yeterday, BMO Capital Markets analyst Keith Bachman saw "continued weakness in consumer and educational buying trends" and cut his price target from $120 to $108 before MacWorld's keynote. He says: "We note that Apple, like many of our stocks, currently benefits from negative sentiment, and recognition by buy-side investors that current Street estimates are too high. However, we don't think Apple will trade well between Macworld and its earnings conference call, with realistic concerns about March quarter guidance. We believe that buying the stock owing to weakness from guidance will prove profitable, given that Apple is typically overly conservative."
Bachman lowered his fiscal '09 earnings estimate to $4.60 from $5.11, below consensus of $5.12. He lowered revenue estimates for the March quarter, predicting Apple will guide to $7.1 billion to $7.5 billion on earnings of 75-85 cents a share. Consensus is $8.4 billion and $1.15 a share. That's a big gap, and the thinking goes that until Apple clarifies its guidance shares could wobble. He writes, "We believe the magnitude of the difference between March-quarter guidance and current Street estimates is likely to pressure shares in the short term."
