Apple Isn't Recession-Proof 29 comments
Larry Dignan
From ZDNet:
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Morgan Stanley analyst Kathryn Huberty thinks that Apple (AAPL) can’t outrun a slowing economy. And she’s betting her estimates on it.
In a research note Monday, Huberty downgraded Apple shares from “overweight” to “equal weight” and lowered her price target to $115 from $178 on the theory that the company can’t beat a PC unit growth slowdown.
Huberty’s theory, which rattled Apple shares along with an RBC downgrade, goes like this:
PC unit growth is decelerating. Here’s how she is cutting her targets for Apple’s December quarter.
The big source of growth in the PC market is sub-$1,000 units. Apple doesn’t play the sub-$1,000 game. Analysts have been beating this netbook worry drum in recent days. Huberty’s money quote:
Our proprietary analysis of US PC shipments by price segment suggests that unit growth is shifting to the low-end of the market (sub $1,000). With 69% market share of US consumer PC sales above $1,500, we don’t believe AAPL can continue to grow 3x the market rate near-term (which is what we believe is reflected in consensus models). Our revised Mac forecast assumes 18% YoY F2009 unit growth, down from 39% in F2008 (and our prior F2009 estimate of 29%). Going forward, we believe Apple’s ability to maintain both its unit growth premium (roughly 3x) and average selling price (ASP) premium (roughly 1.5x) versus the market is unlikely.
Apple’s earnings growth will decelerate from a strong June quarter. Apple is expected to report fiscal third quarter earnings of $1.13 a share next month.
Investors are compressing earnings multiples for growth stocks. You only need a stock chart to figure that out. Here’s Apple year to date.
Simply put, Apple isn’t immune from what’s happening in the broader economy. It all sounds logical, but Huberty acknowledges that Apple’s “2-3 year market share story is intact.”
Huberty also notes that Apple is likely to deliver a conservative December quarter outlook–a prudent move that’s totally in keeping with the company’s playbook. The big question is whether Apple’s outlook will be more than its usual lowball guidance. We’ll soon find out.
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This article has 29 comments:
Fact is, Huberty is an idiot who has never got it right, and talking about Apple gets you hits and action, because its a one-in-a-million company.
Sub-$1000? Apple has the Macbook at around $1000 and the MacMini at $599. Hello?
Time for a complete re-write of the USA stock market system and HEAVY restrictions on 'analysts'.
Hopefully, Obama will do something about this nasty gambling game and its crooked players.
Computers are essential items, and Apple makes the very best ones.
These analysts are simply wrong - and will be proved so in the coming months.
Wal-mart people cant afford Apple products - they never could and never will.
Does this fool Huberty think that Apple has ever sold to the low-end?
Apple: recession proof, but not idiot proof, sadly.
Apple doesn't have to outrun the bear, it just has to outrun Microsoft.
Or, the Economy totally sucks;and, why didn't she just downgrade everybody.
Some are already here. Nice.
Also, I think the analysts have failed to note that it's back-to-school time, and if you need a laptop, you can't do better than an Apple model, for any price (simply because no Windows laptops come bundled with a decent OS).
Apple and it's customers aren't recession proof, but they are probably not the same foolish people who over mortgaged their homes, etc... People who value quality in computers also are smart enough not to over extend themselves, etc... Those people would be far more likely to get a Dell at Best Buy, etc.... not a Mac.
Probably the worst effect of the Bush depression would be on iPod sales, but then again, those are very affordable, and extremely popular. But then, you yourself have one of these, so you already knew that. You still have your job? If not, better stop reading the internet on that 'toy' you have there...
Is that an affermation ? Based on what ?
ADDED today.
They all copy Apple. It's just that simple.
Go to an Apple or AT&T store, or go to a cafe and look what laptops people are using, and tell me that Apple won't exceed earnings.
They're not using gray boxes, I can tell you that.
A couple of points for morons who casually toss off stupid terms like "Bush depression." First, it isn't even widely accepted that we are in an actual recession yet, much less a depression, so a person who uses that word is either too stupid to know the difference, or too invested in one political party or hatred of another to care. Second, what did the Democrat-led Congress do over their period of control to head off this financial disaster? You do realize that Congress currently has a public approval rating even lower than the President's? Wake up.
Powerful machine from Toshiba? Ha ha ha ha. And how much cheaper is it than a MacBook? How do the specs compare?
You guys keep pushing this tired argument. Apple isn't more expensive, just has far better hardware AND software so long as you are buying more than the grey market or discount equipment.
China Brazil and India are large markets, but the size of the middle class is still quite small. I think you are insulting these people---they are smart enough to see what is best and what is an also-ran, copy cat 'solution'.
Disaster? would that be because the phones have not been on sale there yet? I have heard there is a rather large grey market for iPhones in these countries even before Apple sold them there, and also that Apple are finalizing a special iPhone for the slightly different wireless spec in China.
Anyone can see that the iPhone is a far better device than anything we have seen to date. Work with it a few weeks, have a decent appreciation for computing, and you will say the same thing about Mac unless you just are stuck in Windows-land and would rather not bother with anything better.
I think you exaggerate a bit on the price differences. It's quite easy to find the MacBook for less than $900. You complain about no one in India buying iPhone, but you have one yourself. Why did you buy it if you did not think it was a great device? It is much more expensive in these new markets which have not yet been tied to a cell provider contract. The iPhone, like any other computer, will be cheaper over time and with competition such as the G1.
Nokia has a 'touch based' device. Keep in mind, the rotary dial phone is also a touch based device.
<< Nokia has a 'touch based' device. Keep in mind, the rotary dial phone is also a touch based device >>
Still laughing ... thanks for making my night!
Apple doesn't set the end-price of the iPhone, the carrier does. You don't know the facts. Apple sells the phones to carriers who then subsidize the price based on contract agreements with customer. In addition, businesses use a price skimming strategy when there is no rush for gaining market share. Start with a high price and those willing to pay that amount buy, then after that demand at high price level ebbs, lower the price some, and capture demand at that price point. Repeat and repeat. Why set price low initially if people will pay more? There isn't enough production supply of iPhones to support the demand there might be at low initial price yet, so not possible to make up lower price on higher volume when there isn't any stock left.
iPhones in China are not a disaster, for not even being officially sold there, reports from China Mobile are that 500k or so are on the network.
Macs have been more expensive for years and continued to gain market share. The high end consumer isn't going to start shopping at wal-mart because of a slow economy.