FBR Capital Cuts Numbers on Apple (AAPL) Ahead of Q2 Print; Says Stock is 'Compelling' Buy

April 23, 2013 8:00 AM EDT Send to a Friend
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Price: $106.98 -0.34%

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    55 Buy, 10 Hold, 3 Sell

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FBR Capital cut its price target on Apple (NASDAQ: AAPL) from $625 to $525 ahead of Q2 earnings after the close today. The Outperform rating was maintained.

The firm notes that with shares trading at 6.8x 2013 $41.11 estimated EPS (ex-cash), they are attractively valued. That said, the firm said they continue to struggle with the thought that the next catalyst to get shares headed in an upward trajectory remains elusive.

"Management has been surprisingly quiet about how Apple may deploy its $130B in cash and marketable securities," analyst Scott Thompson said. "Furthermore, execution has been plagued by operational missteps and a steady stream of reported production cuts."

According to the analyst, Apple could improve the situation for shareholder by (1) securing China Mobile as a formal sales channel, (2) boosting ROI for shares by putting a portion of Apple's cash to work through raising a dividend, share repurchases or a combination of both, and (3) developing and announcing a partial refresh or credible new product that would drive earnings appreciation.

FBR cut F2Q13/FY13 revenue estimates to $40.8B/$171.7B from $41.9B/$176.2B. F2Q13/FY13 margin estimates decline to gross margin of 37.6%/37.9% from 37.9%/38.6%, while operating margin estimates decline to 28.8%/29.5% from 29.1%/30.4%, respectively. EPS estimates fall to $9.42/$40.47 from $9.75/$42.93, respectively.

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 $398.67 yesterday.


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