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 Analysts, for the most part, remain as upbeat as ever on Apple Inc <AAPL.O>
after investors knocked more than $65 billion off the company's
market value in initial reaction to the company's quarterly results
on Tuesday.
Only one of the 16 brokerages that issued reports assessing Apple's
earnings cut its rating on the stock. Of the rest, 11 kept their
"buy" or equivalent rating and four a "hold".
"We believe Apple's future prospects have never been brighter,"
Cantor Fitzgerald analyst Brian White said in a research note,
maintaining his "buy" rating.
Investors remained wary, however.
Apple shares, which have risen almost 19 percent this year, were
down 6.4 percent at $122.35 in premarket trading.
"As Apple has become the 'gold standard' of technology, it is held
to a higher standard," said FBR analyst Daniel Ives, who described
the iPhone maker's quarter as "good but not great."
Most analysts looked beyond the immediate disappointment.
"With a new iPhone around the corner, the seasonally stronger
quarters ahead and a possible Apple TV update, coupled with
valuation, we would be buyers on weakness," said analysts at Robert
W. Baird, who rate the stock "outperform".
J.P. Morgan's Rod Hall was among those who said the stock's fall had
been overdone, noting among other things the better-than-expected
average selling prices for iPhones in the quarter.
RISE OF THE MIDDLE CLASS
Growth in emerging markets such as China and India, where many
believe Apple is likely to take market share from Android, is key a
reason for optimism, analysts said.
"We believe the company is positioned to exploit the rise of the
middle class in these geographies over the next several years,"
William Blair analyst Anile Doral, who has an "outperform" rating on
Apple, wrote in a client note.
Apple's iPhone sales in China more than doubled in the quarter to
$13.23 billion.
Total iPhone sales rose 35 percent to 47.5 million.
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While that fell short of the 49 million many analysts had expected,
NBC's Mark Mahoney noted that only 27 percent of iPhone users had
migrated to iPhone 6.
This, he said, suggested the iPhone 6s refresh cycle will benefit
the tail end of the September quarter and drive growth.
Piper Jaffrey's Gene Munster also noted that growth in iPhone sales
had outstripped overall market growth, which he said was in the low
teens.
Munster raised target price on the stock by 6 percent to $172, while
maintaining "overweight" rating.
Of 48 analysts covering Apple, 16 have "strong buy" rating, 21 a
"buy," 10 a "hold" and one a "sell", according to Thomson Reuters
data. The median target price is $150.
Only Cowmen & Co analyst Timothy Arc downgraded Apple on Wednesday -
to "market perform" from "outperform".
Despite rising 40 percent in the past year, Apple's stock still
trades at a significant discount to that of tech peers such as
Google Inc and Microsoft Corp.
As well, the stock's current price-to-earnings multiple of 13.7 is
well below its 10-year historical median of 16.2. Google trades at
22 times forward earnings, and Microsoft at 17 times.
(Editing by Ted Kerr)
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