Jefferies Slashes Apple (AAPL) Price Target to $420; Sees Later iPhone Launches

March 12, 2013 6:45 AM EDT
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Jefferies analyst Peter Misek cut estimates and his price target on Apple (NASDAQ: AAPL) from $500 to $420 following the latest round of supplier checks which pointed to continued weakness. The firm maintained a Hold rating.

Misek cut revenues to the low end of CQ1 guidance and see a 25% chance of missing guidance. He also sees later iPhone 5S and low-cost iPhone launches and possibly quicker iPad launches to compensate.

The analyst cut calendar Q1 iPhone estimate from 37.5M to 35M due to builds being only ~25M. He cut revenues to $41 billion (guidance $41-$43 billion; consensus $43 billion) but see a 25% probability of missed guidance due to sales slowing even further in H2:Mar after Samsung's Galaxy S4 launch event this Thursday.

The firm's checks indicate Apple's suppliers are having problems with the new casing colors leading to a push out from Jun to Jul-Sep after Apple hoped to pull forward the update. Checks also indicate pricing of the low-cost iPhone will be $350-$450 as some of the specs are higher-end than we expected (e.g., 4" incell retina display, same app processor as the 5S). The main difference is the housing (plastic vs. aluminum). They estimate mid-40%s GM for the 5S and low 30%s for the low-cost.

Misek also believes Apple is switching to an IGZO display for the 9.7" iPad to cut the weight in half and attempt to reboot sales; however, yield issues could still make this a CQ3 event. They also expect a retina mini.

The iPhone 5S and iPhone 6 may not be enough, according to the analyst. "The phones could have fingerprint technology and we believe Apple is trying to move the iPhone 6 launch to CQ1 to stop the hemorrhaging to phablets, but historically when handset makers fall out of favor (e.g., the RAZR, BBRY, HTC) they fall faster/further than expected."

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 $437.87 yesterday.

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