Nomura Slashes Apple (AAPL) Price Target to $530, Sees Downside Risk of $400
Analyst Stuart Jeffrey notes iPhone pressures highlight margin fears, and sees potential downside to $400 on gross margin declines.
"To reflect signs of weaker-than-expected iPhone 5 sales, we have cut unit estimates by 5% in FY13E and by 8% for FY14E," the analyst notes. "Our scenario analysis shows that if iPhone gross margins fall from a recent high of 55% (estimated) to 45%, EPS for FY14E and FY15E will likely peak at $46 to $48, with $4-5 downside if margins fall to 40% – the historic peak for mobile phone vendors. Our blended average fair value based on falling iPhone gross margins comes to $495 – $579 (ex / with excess cash), with potential downside to $400 and upside to $660."
Downside risk is likely limited by low multiples, likely low buy-side estimates relative to sell-side consensus, and scope for dividend increase, the firm also notes.
FY13E EPS from $51.68 to $45.54; FY14E EPS from $55.58 to $49.69.
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Shares of Apple closed at $501.75 yesterday, with a 52 week range of $418.66-$705.07.