Wells Fargo Lowers Numbers on Apple (AAPL); Resetting Street Estimates is a Positive
Wells Fargo lowered estimates and its valuation range on Outperform-rated Apple (NASDAQ: AAPL) from $680-$730 to $600-$630. The firm maintained an Outperform rating.
Analyst Maynard Um comments, "Apple's decision to change the way it provides guidance appears to be sparking fears that the new ranges offered by management may mean the end of material upside to guidance. While this may create uncertainty through next earnings, we see the resetting of Street estimates as positive. Apple’s new reporting format was also a surprise and will test new assumptions about each segment’s gross margins (we feel comfortable with our newly calculated assumptions) though we do think there is better ASP transparency now. Given the uncertainties around Macs (was it a capacity constraint impacting units or cannibalization?), iPhones (expectations were for units around 50-ish), iPads (mix shift impact to more Mini’s), and iPods (weaker than expected), the aftermarket selloff may be explainable. However, we maintain our belief that the toughest year-over-year compares will start to ease in the back half and that greater economies of scale (given our expectations for similarities between iPhone 5 and next gen iPhone) will drive gross margin improvement as well earnings reacceleration. While this may manifest itself more in FY2014 estimates, we believe anticipation of the acceleration vis a vis supply chain orders should start to improve sentiment into the summer. We lower our valuation range to $600-630 based on roughly 10x our calendar 2013 EPS estimate of $46.23 plus net cash (on an expectation that there will be supply chain signs of acceleration and that estimates still could prove to be conservative). We lower our 2013E EPS to $44.51 from $47.37 and 2014E EPS to $49.86 from $53.38."
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 $514.01 yesterday, with a 52 week range of $419.55-$705.07.
Analyst Maynard Um comments, "Apple's decision to change the way it provides guidance appears to be sparking fears that the new ranges offered by management may mean the end of material upside to guidance. While this may create uncertainty through next earnings, we see the resetting of Street estimates as positive. Apple’s new reporting format was also a surprise and will test new assumptions about each segment’s gross margins (we feel comfortable with our newly calculated assumptions) though we do think there is better ASP transparency now. Given the uncertainties around Macs (was it a capacity constraint impacting units or cannibalization?), iPhones (expectations were for units around 50-ish), iPads (mix shift impact to more Mini’s), and iPods (weaker than expected), the aftermarket selloff may be explainable. However, we maintain our belief that the toughest year-over-year compares will start to ease in the back half and that greater economies of scale (given our expectations for similarities between iPhone 5 and next gen iPhone) will drive gross margin improvement as well earnings reacceleration. While this may manifest itself more in FY2014 estimates, we believe anticipation of the acceleration vis a vis supply chain orders should start to improve sentiment into the summer. We lower our valuation range to $600-630 based on roughly 10x our calendar 2013 EPS estimate of $46.23 plus net cash (on an expectation that there will be supply chain signs of acceleration and that estimates still could prove to be conservative). We lower our 2013E EPS to $44.51 from $47.37 and 2014E EPS to $49.86 from $53.38."
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 $514.01 yesterday, with a 52 week range of $419.55-$705.07.