Goldman Sachs Expresses Concerns over Apple (AAPL) Q4 Results, But Keeps Top Rating

October 26, 2012 8:06 AM EDT
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Goldman Sachs weighed in on Apple (NASDAQ: AAPL) following Q4 results after the close. The firm cut their price target from $810 to $760 but maintained a Conviction Buy List rating.

Revenues of $35.97 billion was above their estimate of $35.16 billion and consensus of $35.80 billion. EPS of $8.67 ($8.72 exitems) was above their estimate of $8.56, but fell just short of consensus of $8.75. Goldman noted that iPhone units came in ahead of expectations, while iPad units fell short. On December quarter guidance, revenues is seen at $52 billion and EPS at $11.75, versus their prior forecast of $54.80 billion and $15.55 and consensus of $54.98 billion and $15.41. Goldman notes that Apple's guidance was weighed down by a forecasted drop in gross margins, as the company expects the simultaneous refresh of the majority of its products to add headwinds.

On implications for the quarter, Goldman said iPhone shipments and its commentary around supply improvements "effectively eliminated a key short-term bear argument for the stock."

"We expect Apple to quickly regain some of its recent losses as a result. Nevertheless, the relatively lackluster EPS performance and the gross margin guidance add some incremental concerns," the analyst comments. "Our analysis suggests that the margin issue will ease soon, but it will take strong December quarter revenue and EPS to make up for the past two earnings shortfalls. We've added some incremental caution to our estimates until this occurs and to account for the weak macro environment."

Goldman adjusted FY2013/FY2014 EPS by an average -8%. FY13 EPS goes from $53.07 to $57.59 and FY14 from $64.87 to $60.79.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $609.54 yesterday.

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