Apple Wins Over Analysts Following Impressive Q2 Earnings

Analysts are lining up with ratings upgrades and price target increases following Apple Inc.'s (AAPL) better-than-expected 2009 second quarter results released Wednesday night after market close.

RBC Capital analyst Mike Abramsky for one, upgraded his Apple to "outperform" and raised his price target from $95 to $165 on "higher earnings outlook and sentiment."

He said prior concerns regarding recession headwinds, margin downshifts and management uncertainty have either been mitigated or resolved, which has left him more enthusiastic about turnaround in consumer demand, improved margin visibility and stronger product resiliency, in particular within the smartphone market

He added that he discounted up until now the importance of Apple's valuation innovation premium, that has provided Apple a leg up against the rest of the NASDAQ.

He wrote:

We underestimated Apple's "VIP," investor willingness to look beyond near-term challenges, focus on iPhone leadership and the stability of cash and belief [that] Apple will continue to out-innovate peers.

Citigroup Global Markets analyst Richard Gardner raised his price target from $147 to $152 and maintained his buy rating. He did, however, express concerns in the near term, saying Apple's gross margin has likely peaked for the timing being making it difficult to foresee large earnings upside versus consensus for at least the next couple of quarters.

He noted to clients:

Management has been warning of a gross margin reversal for several quarters.

However, with several key components heading higher in price (particularly NAND flash), several product refreshes around the corner (which typically entail pricing adjustments) and dads/grads/back-to-school promotions coming in June, we now concur that gross margin will head south for the next several quarters.

Apple said Wednesday that net income rose 15% to $1.21-billion or $1.33 a share. The stock has climbed a little over 3% so far Thursday.

Comments

[Techtrader10:]

I wouldn't want to be forced to follow these guys into a battle. They are so pathetic, it amazes me they can get paid to do what they do.

Apr 24 11:02 AM

[mark46:]

Abramsky should've just wrote "I fscked up. I deserve to be fired. I told you to "sell low" as AAPL surged 40%, and now trust me, as I tell you to buy." Really, the guy knows nothing.

Apr 24 11:49 AM

[AdamC:]

Gross margin heading south?

When you pay cash for components you can command a much better price than others.

I am still trying to figure out how RIMM manage to keep their gross margin at 40%.

Apr 24 02:01 PM

[aapladay:]

This is why I jumped back in in the 80's. Everyone said the market was going down more, but there was way too much upside to miss. Luckily I didn't listen and didn't lose. I am still staying long too, non GAAP revenue is on pace to be over $8. It has the potential to be over $10 next year, but it will take new product releases to achieve that IMHO.

Apr 24 02:02 PM

[Darla:]

"We underestimated Apple's "VIP," investor willingness to look beyond near-term challenges, focus on iPhone leadership and the stability of cash and belief [that] Apple will continue to out-innovate peers."

As Tonto said, "What do you mean WE, white man?"

Apr 24 06:03 PM

[Zoltan L. K...:]

Apple's product portfolio is just fine for the current environment. Most product categories are not close to saturated, and the ones with slower price-points are replaced quite fast with new innovative functions and design. Manufacturers with higher market share and mid-priced products have pressure on their pricing and the only option to sell cheap. Even netbooks are a sign for camouflaging price cuts.

Apr 25 02:54 AM

[the Graduate:]

"Analysts are lining up with ratings upgrades and price target increases..."

Uh oh

Apr 25 03:19 PM