Merrill Lynch lowers Apple Computer rating from ‘buy’ to ‘neutral’

“Merrill Lynch has lowered its rating on Apple shares from Buy to Neutral. The financial firm says Apple’s execution ‘has been extraordinary’ but questions the ‘upside in the stock’ moving forward. Merrill cites the Intel transition that, while 2-3 quarters away, ‘could cause customers to pause, offsetting the halo effect.’ Additionally, revenue growth deceleration is expected in the next 1-3 quarters. ‘When everyone knows everything is going right for a company, sentiment is hard to improve,’ writes analyst Richard Farmer. Farmer also cites Microsoft Vista, which ‘could hold back Mac share gains in 2007.’ Penetration into the consumer PC installed base by the iPod is expected to reach 35 to 40 percent by 2007, but is ‘unlikely to be dramatically exceeded,'” MacNN reports. Farmer also stated, “It isn’t hard to imagine personal technology pundits writing columns that advise potential Mac buyers to hold off until the Intel machines are ready.”

Full article here.

AppleInsider also has a report here.


  1. ML isn’t known for quality analysis of AAPL, and the above, while well written, is a rehash of many issues already discussed.

    Vista will have little effect on Mac growth. The fact is that XP has suddenly sprouted legs and its share of the OS market has grown 10+% in the past year. OS trackers no longer track Win95 or earlier. Now the interesting thing is that both Linux and MacOSX have gained share against ALL variants of Windows during the same time frame that WinXP has increased share. The bottom line is that XP growth is coming from users of older versions of Windows, and, having waited this long to upgrade to XP, aren’t going to run out and get Vista. Vista share will come from new CPUs. But total PC growth is slowing and Mac growth is 3X the industry rate.

    Not the doom and gloom environment that ML paints, and uses to justify their downgrade.

  2. I always wonder why the transition from PowerPC to Intel is a problem? Is it about the lack of confidence in Apple’s Macintosh engineering, or is it about the market psychology (branding problem) alone?

    If it is about the engineering skills and experience, then we should have gained confidence instead of lossing it. Because Apple is really doing a good job so far.

    If it is about the market psychology, then I guess Apple should start doing more marketing works.

    The undesirable outcome to me will be that people will still feel good in using a far from comparable (in terms of both user-experience and elegance of OS engineering) Windoze OS given all the facts that MacOSX has acheived.

    Really want someone to give me a perspective in seeing this ‘hard-to-comprehend-mentality’

    [I have become a Apple fan since 1994, when I get my first job from a digital design magazine. I am using Apple, MSWindoze, and RedHat to earn for a living.]

  3. You know, this latest bit of piling on against Apple that’s occuring in the press is giving me just about the worst case of indigestion that I’ve had in a long time.

    I’ve decided to box up my computers and close out my ISP account. I don’t think I want to use a computer anymore, particularly under these circumstances.

    Take care. Best wishes for Apple and to all at MDN.

  4. Amazing that these jokers are the “authority” of the market. They don’t know shit, and the stock market is much more efficient than ML to determine value. All they do is sell their wares, and are simply salesmen.

    Certainly if Apple continues to expand by the billions then its market valuation will rise. There are no indications anywhere that things are slowing down, and I expect AAPL should get drubbed at the first sign of reduced acceleration.

  5. Let’s see, we’ll have Q4 earnings announcement on Tuesday, 11-Oct-05 at 5:00 PM. Expect AAPL to take an elevator ride up a few floors on opening of trade on Wednesday, 12-Oct-05 and analysts scrambling to revise their predictions.

    Hee hee. It’s a fun time to own AAPL.

    “Merrill cites the Intel transition that, while 2-3 quarters away, ‘could cause customers to pause, offsetting the halo effect.’”

    Which is why Steve is going to surprise (almost) everyone and announce a Macintel at MWSF in January, and ship later that month. My money is on an iBook, but it could be an updated mini.

    MW “fact,” as in you can take it to the bank.

  6. Some people will wait for the Intel Macs. This effect will probably intensify as we near the release. If Apple is smart they will pull a fast one and release the Intel Macs in January to avoid this but there isn’t any evidence yet that this might happen.

    The thing is, you probably would be better off buying one of the PPC Macs even right before the Intel Macs come out. The PPC Macs are mature products and will have much fewer issues with bugs etc. for quite a while. You will also be able to run classic apps (which wouldn’t mean anything to a switcher probably tho).

    The thing that I would be more likely to wait on would be software. As we near the release of Intel Macs it is going to be increasingly important to only buy software that is offered in Universal Binary Format.

    That said, I am planning on trying to get my company to buy me an Intel Mac notebook. I will tell them I will pay any difference in cost between it and a comparable Dell out of my own pocket. So I will probably end up being an early adopter again. Sorry, I just can’t help myself. ” width=”19″ height=”19″ alt=”tongue rolleye” style=”border:0;” />

  7. Remember that ML is talking to and about stock buyers/sellers. In stock land if a company reports one quarter that they sold 10 million widgets and the next quarter they sold another 10 million widgets, then stock land doesn’t see this as doubling their customer base, they see this as flat growth and that is bad in stock land. A company’s stock price is not a reflection of the quality of the company, only of the impressions of other people in the change potential of the stock price. Stock land is very fickle with AAPL because its stock price varies on every good or bad rumor, before and after each dog-n-pony show, and as we approach school and holiday season. All this variance even though Apple’s technical developments continue in a constant climb.

  8. There really is a lot of room left for growth, but many investors get skiddish considering how much Apple has grown these past few years. From beleagured to bigger than Sony, Apple has to keep the wow factor going.

    No one can predict the future, but ML has been very conservative with AAPL in the past and they are the same now. Piper Jaffrey on the other hand has been nearly spot on– seems like someone there is not just familiar with the on-paper Apple, but also it’s products and the on-the-street response to them. Listen for Piper is my suggestion…

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.