“The optimism over Apple’s services opportunity is overblown, according to one Wall Street firm,” Tae Kim reports for CNBC. “Maxim Group lowered its rating to hold from buy for Apple shares, predicting the company’s subscription businesses will disappoint investors.”
“‘Prior survey data indicates attach rates for [Apple’s] subscription services will be at best 30%, likely lower given ecosystem centric approach, especially for services where entrenched incumbents exist,’ analyst Nehal Chokshi said in a note to clients Wednesday,” Kim reports. “The analyst reduced his price target for Apple shares to $200 from $204, representing 6 percent upside to Tuesday’s close.”
Read more in the full article here.
MacDailyNews Take: iCal’ed.
More Wall Street bullshit
Exactly, these doomers and gloomers are coming out of hibernation 😡 At least these Wall Street Pests could have down graded Apple for lack of hard ware update
Not really Wall St. It’s a small boutique firm, with only 285 people, half are in wealth management; so they focus on small, emerging market, and mid-cap size companies. Not really sure why they cover Apple. The group’s roots are in Investec Ernst from South Africa and the UK.
They have 6 people in equity research. Only 6, and only one covers the tech space, and of the 20-odd companies covered, most are smaller enterprise companies. Apple sticks out like a sore thumb. Like I said, not sure why they cover Apple.
Here’s a link to a Research note on Apple that you can download from November:
Click to access Apple-report.pdf
If you show Apple’s unit sales growing the AVERAGE of the last 3 years (since iPhone 6), then add the explosive growth of iPhone ASP and Services, you get >$110 Billion in revenue for FQ1/2019.
I’ve gone through my formulas (which I’ve been using since 2005) several times looking for errors. I haven’t found any.
Revenue growth YoY
Mac -1.61%
iPhone 4.15%
iPad 1.41%
Services 22.32%
Other Products 38.77%
Total Revenue growth YoY 34.50%
My revenue estimates rank in the top 20 percentile (of ~725 respondents) at estimize.com.
Maxim’s downgrade is crap of the highest order.
My personal end of FY2019 price target is $330 using a ttm earnings multiple of 17.25 (average multiple since February 1, 2017 = 17.97).
It had to happen. Glad I found the error before someone else did (hurts a little less that way.
My FQ1/2019 Revenue estimate was in error. Funny how you examine your formulas again and again and don’t see it. Well, I have seen it.
All my YoY growth rates are correct. My total revenue figure was $15 Billion to high. Ugh.
The net result is that my FY2019 revenue estimate should have read $95.172 Billion, a 7.80% increase YoY.
These adjustments reduce my end of FY2019 price target to $230.
Embarrassing but there it is.
You always try to find errors before publishing/posting, but one or two always seem to sneak through. The warning sign that I saw in your numbers was the escalation of the price target by over 50% based on a fundamental analysis of earnings per share. The escalation well exceeded the revenue growth rate.
I like to take PEG into consideration when evaluating a stock. PEG is just an indicator, and you have to know the basis on which it was calculated (trailing versus projected growth), but it helps to inform an investor on P/E versus earnings growth rate. The general idea is that the P/E multiple should be commensurate with the anticipated growth rate of earnings. Apple has generally had a favorable PEG for years, but analysts appear to be expecting a sharp downturn in Apple’s earnings growth in 2019 and 2020. But I have seen that type of prediction many times before – time will tell.
It’s like guessing, say 13,000, as the number of jelly beans in the jar at the county fair and then fine-tuning the guess to 12,999 because you ate one. I mean, get real!
Apple stock has more manipulations than any other stocks on Wall Street.
In this case, I will add more AAPL if it dropped.
“Maxim Group lowered its rating to hold from buy…”
Got it. Buy shares but don’t hold them…??
I’d hold for dividends even though, I’ve been through a scary time in 2015-2016. Apple helps me become millionaire. I love Apple. Long AAPL.
Good. I’m glad to see the downgrade. Let the cowardly sheep start dumping their Apple shares, so Apple can aggressively continue to back shares at a lower price range.
Any serious Apple investor should be happy there are these firms who want to convince the suckers to sell off their Apple stock. Honestly, though, what sort of serious investor is going to dump their stock due to a $4 price target decrease when that number is still about $13 (6%) above the current share price. I guess I’m just not as greedy as most, as a price target of $200 still looks good to me.
Some of these analyst calls make absolutely no sense to me as a long-term shareholder. I’m still going to be getting my dividends if I hold my Apple stock. Dumping my shares isn’t going to get me anything but a loss.
That analyst would have to explain to me in detail how he arrived at those subscription numbers. With the HomePod offering new features and being offered in more countries, I think services revenue will climb. At some point, Apple is bound to offer a streaming video service and I’m willing to wait until that happens. I’d also like to see what Apple’s WWDC 2018 event has to offer. Waiting a few more days for the event might make a positive difference.
“I think services revenue will climb. At some point, Apple is bound to offer a streaming video service”
And that video streaming service will flow through stereo (surround sound) HomePod(s).
Is the HomePod expensive? Consider that in 2017 analog 1080p flat-panel TVs were flying off the shelves with an average price in excess of $2000. Today a much better, larger, digital 4K HDR flat panels cost well under $1000. Add two HomePods at ~$350 each and you have a far better audio-visual experience than you got 11 years ago for significantly less money.
Nehal Chokshi of maxim group was saying in November that production of iPhone X was suffering from poor yields and that Apple would have insufficient iPhone X devices available to sell.
When Apple’s financial results for that period were announced, it was revealed that iPhone X sales had actually been at record levels and that iPhone revenue for that quarter was $95.6b compared to analyst’s predictions of $85b – $90b. Nehal Chokshi’s prediction for that quarter was $80.9b, which made his one of the lowest analyst’s predictions, wrong by almost $15b or about 15% too low.
Anybody who pays attention to an analyst with such a lousy track record deserves to lose their shirt.
MDN often states that comments have been iCal’d, but we don’t get to see those claims reported later. If I can do it, why can’t journalists and bloggers?
And yet Pandora shares soared after earnings (to my put option chagrin) despite having significantly fewer listening hours YoY. Kid just got home from college and I mentioned Pandora to which I was told it’s so passé with kids that age (the primary user audience.
A general rule of thumb is to trust analysts no further than throw one.
I blame Rosanne.