Citi Cuts Apple Estimates, But Continues Buy Rating

Citigroup’s Richard Gardner Tuesday morning cut his price target and earnings estimates on Apple (AAPL), but repeated his Buy rating on the stock and advised investors to take advantage of weakness in the stock.

Gardner cut his target price to $132, from $153. He also reduced his EPS estimate for the September 2009 fiscal year to $4.78, from $5.13; for 2010 he goes to $5.37, from $6.25; and for FY 2011 he now sees $5.89, down from $7.02. Gardner writes that be brought down his numbers to reflect a more conservative view of consumer spending. He says that soft December quarter iPhone shipments and conservative guidance for the March quarter could pressure the shares; but he would buy the stock if that happens.

Gardner predicts that December quarter iPhone shipments could fall below 4 million units from 6.9 million in the September quarter, “as Apple reduced channel inventories heading into the seasonally weaker first half.” He says that checks suggest that this inventory reduction could also indicate “an earlier-than-normal iPhone refresh in April or May.”

He also says - this is a bit convoluted, bear with me - that the company will guide the March quarter well below the current consensus of $1.13 a share; he says actual results will likely beat guidance, but still come in 10-15 cents below the current Street view.

As for the stock, he says the valuation is compelling, at 9x forward free cash flow, or 6x-7x excluding net cash. Were the stock to take a $7-$8 hit around earnings, he says, “we would be aggressive buyers.”

AAPL Tuesday was up 57 cents, or 0.6%, to $89.23.

Comments

[TraderMom:]

I think we might have a long entry somewhere along 85. This is a high probability set-up if the market does not go down like crazy.

Jan 13 12:45 PM

[Estone:]

The Question is: AAPL bought RIMM, or VISE-VERSA????
.......any answers or knowledge?????

Jan 13 03:39 PM