Apple shares are trading close to the flat line this morning, which is pretty impressive considering the mixed quarter the company reported yesterday afternoon.
As you likely know by now, Apple posted a modest beat at the topline, but missed on the EPS level. Guidance was well below the Street consensus, but that generally bothers almost no one, given the company's long established pattern of low-balling its forecasts. In this case, though, some are bothered by the company's expected sharp drop in gross margin: the company sees 36% in the December quarter, down from 40% in September.
More troubling was a substantial miss on iPad units for the quarter; they sold 14 million, while estimates had ranged as high as 18 million. But the rest of the business did fine, and the company has now piled up $121 billion in cash. (That's enough to buy Facebook. Twice.) And keep in mind also that the stock lately has been under selling pressure; the stock is off close to $100 a share from its recent peak.
Always ready to stand by the company's side, the Street's Apple Corps remain bullish on both the business and the stock. Here's a rundown on some of the analyst commentary on the stock this morning:
- Shaw Wu, Sterne Agee: "While there may be controversy with the light iPads, we believe concerns are overdone," he writes. "And the reason is that there was clearly a customer pause ahead of the iPad mini as it was arguably one of the worse kept secrets out there with widespread media coverage and there was an inventory drawdown of the 3rd generation iPad to make room for a more significant than expected refresh to the 4th generation iPad." He also notes that EPS would have been a beat of 16 cents if not for currency hedging costs.
- Tavis McCourt, Raymond James: He keeps an Outperform rating, but trims his target to $700, form $730. "We continue to view Apple as a secular grower, now trading at a P/E discount to the S&P 500, and only slightly above a median of large cap tech peers."
- Brian White, Topeka Capital: He's sticking with his bullish stance and $1,111 price target. "The Company expects gross margin to come under pressure due to massive product launches over the past six weeks," he writes. "Over the next year, we expect this headwind to turn into a tailwind as efficiencies are realized around these new form factor products. More importantly, Apple continues to innovate with new products such as the iPhone 5 and the iPad mini that we believe will prove to be blockbuster hits this holiday season, while the iPod and Mac lineup have never been stronger. With a 14% correction in the stock price over the past month and now trading at just 9x (ex-cash) our calendar 2013 EPS estimate, we would be aggressive buyers of Apple ahead of the holiday season."
- Mark Moskowitz, J.P. Morgan: "The big topic for investors is likely gross margin," he writes. "In our view, the December quarter guide for gross margin to decline 400 bps likely restores the beat-and-raise potential in the model in the first half of calendar 2013. As Apple scales its new products (iPhone 5, 4th generation iPad, iPad mini and Macs) down the cost curve, we think that consolidated gross margin can start to move back to 40% or better after the December quarter."
- Peter Misek, Jefferies: "We expect product GMs to improve throughout Q4 and for Apple to materially exceed its conservative guidance."
- Gene Munster, Piper Jaffray: "September results demonstrated the strength of the iPhone franchise as units were ahead of Street expectations driven by non-iPhone 5 sales. Based in part on a positive trend from our iPhone 5 survey this week, we remain confident in our iPhone demand assumptions for the combined December and March quarter. We expect margins to rebound in March following December, which is the largest product transition quarter in the company's history. Lastly, we continue to expect iPad to exceed Street expectations of 30% year-over-year growth in 2013."
- Steve Milunovich, UBS: "With the next two quarters more likely to show upside, we like the stock here."
- Charlie Wolf, Needham: "With the virtually simultaneous launch of an all-new product lineup in the past six weeks, Apple is embarking on a quarter unlike any in the past. We’re reducing our fiscal 2013 estimate from $50.00 to $45.75 chiefly because of a deterioration in gross margins accompanying these simultaneous launches. We continue with a Buy rating and price target of $750."
Apple is down $1.70, or 0.3%, to $607.84.
