Apple WWDC: Analysis of the Analysts

| About: Apple Inc. (AAPL)

Apple (NASDAQ:AAPL) shares are down slightly as the Street sorts out the ramifications of Monday’s assorted Mac, iPhone and software announcements. The details on the new iPhones had been fairly accurately leaked to the blogopshere; the updated MacBooks were more of a surprise, but hardly stunning. The two biggest items were the aggressive move to cut the 8 GB iPhone to $99, and the lack of an appearance by CEO Steve Jobs.

I’ve been perusing some of Tuesday morning’s research from the Street, and here are some of their key takeaways:

  • Many analysts responded to the Apple’s aggressive price moves - $99 8GB iPhone, price cuts on the MacBooks and Air, $29 upgrade price for Snow Leopard - by boosting unit forecasts for Macs and iPhones, and moving up their price targets.
  • New targets: Bank of America/Merrill Lynch’s Scott Craig to $160, from $140. Thomas Weisel’s Doug Reid to $170, from $150. J.P. Morgan’s Mark Moskowitz to $155, from $135. Credit Suisse’s Bill Shope to $165, from $140. Susquehana Financial’s Jeffrey Fidicaro to $170, from $155. Goldman Sachs’ David Bailey to $145 from $130. Caris & Co.’s Robert Cihra to $170, from $150. Kaufman Bros.’ Shaw Wu to $176, from $160.
  • China: Lack of announcement on China carrier for the iPhone was “a modest negative,” asserts Merrill Lynch’s Scott Craig.
  • Margin pressure: The price cuts will likely result in lower ASPs for notebooks, Craig and others pointed out. “Margins on notebooks are clearly heading lower,” writes Citigroup’s Richard Gardner. Oppenheimer’s Yair Reiner says that while some investors may worry about margins overall from the price cuts, he thinks they will lead to stronger demand a improve product mix. Tavis McCourt, of Morgan Keegan, in fact writes that non-GAAP gross margins are likely to come down given yesterday’s disclosures.
  • No netbooks? Still no signs of a plan for the netbook market, points out Weisel’s Doug Reid. Meanwhile, Caris & Co’s Cihra still sees a touch-based tablet coming. He notes that touch-screen support is included in Windows 7, and that he doubts Apple will sit idly by while “virtually every Wintel maker readies a touchscreen entry.”
  • Where’s Steve? Quite a few analysts noted the absence of Jobs at the event. Credit Suisse’s Shope writes that “expectations for Steve Jobs’ return at yesterday’s event left people wanting,” and adds that his promised return by the end of June will likely become the near-term focus for the stock. Kaufman Bros. analyst Shaw Wu writes that “the biggest takeaway is the fact that these fairly major announcements were made by someone other than Steve Jobs.” He adds, “we applaud Steve for passing on the baton and creating a culture of success.” JMP Securities analyst Samuel Wilson notes that not only wasn’t Steve Jobs there, his name wasn’t even mentioned from the stage. (They could have repeated that he is on track to come back later this month, for instance.)
  • Price war: A number of analysts noted that by moving the low end of the iPhone line to $99, Apple is placing new pressure on its rivals in the smartphone market. Nomura International’s Richard Windsor says the news is “the worst case scenario for Nokia (NYSE:NOK),” where he sees “little sign of any rectification of the rot that besets its offering in smartphones.” Apple, he says, “has gone for the jugular” with the 8 GB price cut. “Almost everyone is likely to choose an iPhone over a Nokia when presented with no difference in pricing.”
  • I’m a (cheaper) Mac: JMP’s Wilson contends the Mac price cuts “are largely a response to the pressure created by Microsoft’s recently effective advertising efforts targeting the affordability of Macs.”
  • It’s not a phone. It’s a computer: RBC Capital’s Mike Abramsky says Monday’s announcements demonstrates “how huge, nascent and under-penetrated iPhone’s addressable market is. Beyond phone, email, Web, apps, iPhone is fast becoming your PC, TV, newspaper, radio, wallet, cable box, etc., and replacing formerly discrete devices.”
  • AT&T tensions? Bernstein Research analyst Toni Sacconaghi says there are signs of tension between Apple and AT&T. He notes that Apple announced new iPhone support for both tethering and MMS, but that AT&T won’t initially support either. He also notes that AT&T issued a release yesterday reiterating its guidance, “effectively pointing to Apple as the sole sponsor of the price cut” for the 8 GB iPhone. Also note that despite much discussions, there were no announcements of reductions in data plan pricing. UBS analyst Maynard Um asserted Tuesday morning that “high data pricing plans could limit dramatic elasticity to demand.

AAPL today is off $1.16, or 0.8%, to $142.69.

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