Two Analysts Who Are Liking Apple Now

Apple (AAPL) shares are getting a boost from a pair of bullish calls this morning from the Street.

The most surprising one comes from Shaw Wu, of American Technology Research. He raises his rating on the stock to Buy from Neutral, reversing a downgrade on the stock he made just a few weeks ago. Wu’s downgrade came right before the company reported March quarter earnings; it turned out to be far too gloomy, as he conceded today.

”We overestimated the potential negative reaction on the quarter and in hindsight should have moderated our near-term posture rather than downgrading,” he writes. “While AAPL shares will likely remain volatile and may offer a better entry point, we need to align our rating with our longer term view on fundamentals.” He set a $210 price target on the stock.

Meanwhile, RBC Capital’s Mike Abramsky this morning upped his target price on Apple to $220 from $200. Abramsky now sees Apple selling 14 million iPhones this year - far more than the company’s own 10 million-unit target - and 24 million in 2009. Abramsky also says he thinks Apple may be planning to allow subsidized pricing, while possibly reducing or eliminating revenue sharing deals with carriers, and supporting global unlocked phone sales. He says 3G should be on target for a June launch.

Abramsky today raised his EPS estimate to $5.40 from $5.37 for the September 2008 fiscal year; for he goes to $6.50 from $6.23 for ‘09, and sees $8 a share in 2010.

Comments

[User 169146]

woz

[bluesmoke]

When too many analysts jump on board, it usually signals it's time to abandon ship.

Ps- weren't you the guy who was bashing solar power too?

[TanToday]

BACKGROUND INFORMATION NEEDED to FULLY APPRECIATE THE GAMES BEING PLAYED HERE BY SHAW WU:


Join Date: Apr 2008
Posts: 12

Shaw Wu Downgrade Reminiscent of Stock Manipulation
Shaw Wu Downgrade Reminiscent of Stock Manipulation
Tuesday, April 22, 2008
bullcross.blogspot.com...

Shares of Apple, Inc. (Nasdaq: AAPL) tumbled more than 5.00% or $9.00 this morning on the NASDAQ stock exchange when AmTech analyst Shaw Wu cut his rating on shares of Apple from Buy to Neutral. As the guiding reasoning for the downgrade, Shaw Wu claims "We are concerned that expectations may be too high with the stock rebounding over 45 percent in recent weeks," the analyst told clients. "While we believe Apple will report a strong quarter relative to guidance and published consensus estimates, we are concerned whether it will be good enough and whether investors will be as forgiving with conservative guidance."

Really? Well, Mr. Wu, why don't you give the investor a chance to make their own decisions instead of making their decisions for them one day before earnings? By downgrading Apple one day before earnings, Shaw Wu has all but triggered a pre-earnings sell-off, thus making it difficult for Apple to make any meaningful move to the upside when it reports tomorrow afternoon. Shaw Wu knows all too well what happens when an analyst downgrades Apple. He knew or should have known that Apple would fall precipitously on the downgrade. What is more, he knew or should have known that Apple would fall more than usual when downgraded just one day before earnings. He know or should have known that stocks tends to be at the precipice of a huge move in and around earnings. Thus, I wonder, what is Shaw Wu's real motivation with his downgrade this morning? Is it because his $175 price target was, like other analysts targets, about to be obliterated as too low? Or perhaps he wanted to allow certain key investors one last opportunity to get into the stock before it makes a huge move in the future. Whatever the reason, his motivation should at least be called into question.

Shaw Wu's actions are clearly suggestive of stock manipulation. And this isn't the first time Mr. Wu of AmTech has conducted himself in the practice of mindlessly bashing the stock for no legally viable reason. In June-July of 2006, Shaw Wu's actions were so abhorrent, that he has lost a lot of credibility in my eyes. His financial analysis is good at times, but for the most part, he is a worthless analyst with nothing meaningful to contribute from a financial perspective. In April of 2006, Apple reached a high of $73.80 after it reported solid second quarter earnings. Yet, shortly after the earnings report, everything fell apart and quickly. Apple fell from $73.80 in April to $50.00 in July. Part of this had to do with Fed Chief Ben Bernanke telling Maria Bartaromo of CNBC that he didn't want investors to think we was done raising interest rates and part of the sell off had to do with the market predicting a recession that never happened. Yet, notwithstanding the market sentiments during the period, much of the sell-off was due to an orchestrated bashing led by none other than Shaw Wu of AmTech.

Shaw Wu started a baseless rumor that Apple was expected to release a new iPod Nano in August. He claimed that the street consensus was for an iPod relase in August when no one on the street was expecting such a release. What I don't quite understand is how one can get away with claiming that "the street" has a consensus estimate for when a product will be released, when no on "the street" shares that view? Both conventional wisdom and sensible analysis indicated that Apple would release the new 2G iPod Nano in September when Apple usually releases such refreshes. Yet, Shaw Wu built up a straw man that Apple was expected to release the Nano in August and then knocked down that straw man by saying that Apple has delayed its release. Every time Shaw Wu released an "updated note" on the Nano delay controversy, the stock price fell significantly. I know. I was there.

On June 15, 2006, Shaw Wu said in a research note to clients, "We are seeing weaker iPod nano shipments offset by strength in video iPods and iPod shuffles. We continue to believe the iPod nano is in need of a refresh and will likely see one in the September quarter." Notice how Shaw Wu holds the general view that the iPod Nano will be released in the September quarter. He is clever in saying the words "September quarter" instead of saying the month of September. Just two weeks later, when the market started selling off, Shaw Wu writes another note where he argues that the iPod Nano has been delayed for a quarter or two. This is where the rumor mongering begins. He also cut his price on shares of Apple from $101 to $75 that day. When Apple was down, Shaw Wu kicked Apple in the face.

On July 10, 2006, Shaw Wu all of sudden, and for no good reason, claims that the street's consensus view for a new iPod Nano was for the July-August time frame when no one on the street shared that view. Appleinsider notes, "In a research note released to clients on Monday morning, American Technology Research analyst Shaw Wu maintained his stance that the new iPod nano -- which he has dubbed the "mini video iPod" -- will miss the Street's consensus view of a July or August introduction." Give me a break! Shaw Wu writes two separate research notes on a largely unconfirmed and insignificant iPod Nano delay within a 2-week period. For those who were invested in Apple in 2006, they will agree that the "iPod Nano delay controversy" was very reminiscent of the missing iPhone debate that was spurred by Bernstein Research analyst Toni Sacconaghi this past January. Shaw Wu went from bullish on June 14 to bearish on June 28. He cut his price target by 25% and made up a rumor about an iPod Nano delay. I wonder why? What motivated Shaw Wu's actions at that time? And then, when Apple reports blow out earnings on July 19, 2006, Shaw Wu's sentiments change completely?

Either Shaw Wu is terrible at financial analysis or he knows what he is doing and actively attempts to manipulate the stock price. He was either dead wrong about the Nano delays as Apple released the 2G iPod Nano on September 12, 2006 or he actively manipulates. Shaw Wu was either dead wrong about his price cut of Apple's shares from $101 to $75 or he actively attempts to manipulate. I have just a few questions Mr. Wu: Why did you make up a rumor that Apple was set to release a Nano in August 2006 and then make up another rumor that the iPod would be delayed? Why did you go from bullish to bearish in two weeks? What changed? How does it feel to be dead wrong? Why did you downgrade Apple with one day to go until earnings? Is it because you have no clue as to what you are talking about or is because someone has paid you to downgrade Apple today? Either way, investors should ignore anything you have to say.
Finally, you say that you think Apple is trading at 28 times 2009 earnings? Believing that Apple is trading at 28 times 2009's earnings when it trades at $168 presupposes that 2009 earnings will be $6.00 a share. That's interesting. So you think Apple will show almost no growth between 2008 and 2009? Let me let you in on a little secret. Apple is going to earn $5.80 in 2008. Thus, your 28 times 2009 estimates of $6.00 in EPS assumes that Apple will see only 3.5% growth in 2009 - a year when Apple will start to see an impact to EPS from deferred iPhone revenue. The computer industry is growing at 11% a year alone. I guess you think that Apple will grow at 1/4 of the current market rate.

Given Shaw Wu's quesitonable history, Shaw Wu is either terrible at financial analysis and forecasting or an active manipulator. Either way, investors should take what he has to saw with a huge grain of salt.

Disclosure: I own long term 2009 and 2010 call options in Apple. The information contained in this blog is not to be taken as either an investment or trading recommendation, and serious traders or investors should consult with their own professional financial advisers before acting on any thoughts expressed in this publication.

Andy M. Zaky
Bullish Cross
bullcross.com

[KenC]

First, Shaw Wu has gone on the record with Elmer-Dewitt's Fortune blog that he doesn't understand Apple's "unprecedented&qu... Deferred Revenues, and now the RBS guy shows he doesn't understand it either.

This RBS analyst is one of many who still don't understand Deferred Revenues and how it is going to impact Apple's earnings in FY09.

He expects 24 million iPhones sold in '09, and yet, he sees earnings of $5.40 this year, and $6.50 next. That's only 20% eps growth. Doesn't he realize that Apple is Deferring revenues of the iPhone, and that the full effect of iPhone revenues, thus won't be felt until FY09? Where's the effect then?

The fact is, these analysts have NOT modeled in iPhone Deferred Revs properly. If by 09 Apple is fully feeling the effect of iPhone revs, then we should see it in earnings.

Let's try to calculate the eps effect should be by then. Let's say by FY09, you average the deferred revs of FY07 and FY08, and get about 12 million iPhones, on an annualized basis. At $400 per unit, that's $4.8B in annual revs, and about $1.7B in Gross Income, or about $820M in Net Income, or about $0.93 a share.

So, 93 cents of his $1.10 eps growth is coming from iPhones? No, that $1.10 is coming from Macs and stores and iPods, etc. He hasn't even factored in the iPhone deferred revenues.

Honestly, I can't say it more than I already have, but people are going to be surprised by Apple earnings, when the full effect of Deferred Revs are incorporated. If the analysts don't get it, then I doubt the average shareholder does.

[TanToday]

--->>it turned out to be far too gloomy, as he conceded today.<<<<...

Yeah, that happens when a company ONLY reports earnings UP 34% in a hard economy, and when they are ONLY growing 3.5X faster than any of their rivals.

GLOOM. DOOM. SELL, SELL.....

Followed immediately BY....NEVERMIND...BUY BUY BUY

And they have the chutzpah to show their faces in polite society. They need to be relegated to the same corner of the universe as Roman Catholic Bishops. Both have ZERO credibility and many should be BEHIND bars, not frequenting them after work.

[fatcat]

I love the way any apple article brings out outrage on all sides...just tells an old guy like me that theres a trade there...argue your hearts out!!

[sf94127]

Wu issued his downgrade a day before earnings which is strange; at that late stage one would think wait until earnings to change the rating. If you wanted to impact the price before earnings that was the time. I didn't buy his rating and bought more on the dip.

[Trader T]

Only fools pay attention to analysts - do your own DD.

[Partners inGrime]

Wu hoo! Buying opportunity. :)