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Time for Apple (AAPL) Stock to Take a Breather, Nomura Says

April 28, 2015 6:46 AM EDT
Get Alerts AAPL Hot Sheet
Price: $170.94 -1.37%

Rating Summary:
    39 Buy, 25 Hold, 7 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 13 | Down: 10 | New: 10
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Nomura Securities analyst Stuart Jeffrey bumped his price target on Apple (NASDAQ: AAPL) to $133.00 (from $129.00) following results but maintained a Neutral rating and said it is time for the stock to take a breather.

Jeffrey commented, "Appleā€™s FQ2 revenue beat by 2.3%, gross margin by 160bp and EPS by 8%, relative to Nomura estimates. The gross margin beat is perhaps most important, as any stock sell-off is most likely to be driven by gross margin disappointments, in our view. Guidance though, was in line with prior expectations. The rise in capital returns met but failed to beat expectations. iPhone continues to beat forecasts, with iPad missing and the Mac in line. Cash flow remains strong but was also in line with our estimates. Our EPS estimates are increased by 1.5% in FY15E to $8.98 and are flat at $9.06 for FY16E."

The analyst sees limited levers to drive the stock higher. "Revenue growth appears to have halved in developed markets, consistent with early market data suggesting that iPhone share gains from FQ1 are eroding. We estimate that 65% of growth came from emerging markets, driven by expanding distribution in China. If China continues to correlate well with Japan, then a slowdown in growth seems likely in the coming months, and certainly in 2016. We estimate that Apple could afford to add a further $10bn to its annual buyback program, boosting EPS by 5%, but estimate that this would cause debt to rise to $141bn by end FY17E and suspect that management is unlikely to want to go much higher; so limiting scope for further EPS upside."

Over the next few quarters they believe that the Apple Watch is likely the key driver of any share price upside at Apple.

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 $132.65 yesterday.



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