“J.P. Morgan downgraded Apple, Inc. to neutral from overweight, saying that while the company’s first-quarter earnings whizzed past expectations, Mac shipments of 1.6 million units missed its forecast of 1.9 million units. The broker warned that as the company enters the seasonally weaker period of the year, shipments of iPod digital music players may disappoint heightened expectations,” Abby Deveney reports for MarketWatch.
Full article here.
“For its fiscal second-quarter, Apple estimates it will earn 54 cents to 56 cents a share on revenue in a range of $4.8 billion to $4.9 billion. That’s below the average forecast of Wall Street analysts, who expected Apple to earn 60 cents a share on $5.22 billion in revenue,” Steve Goldstein and Tomi Kilgore report for MarketWatch. “The stock fell 2.1% to $93.01 in pre-open trading. J.P. Morgan cut the stock to neutral in response.”
Full article here.
So, J.P. Morgan hasn’t yet figured out that Apple’s guidance is usually extremely conservative?
Related articles:
Slew of analysts up price targets on Apple Inc. – January 18, 2007
Apple smashes Street, posts revenue of $7.1 billion and record net quarterly profit of $1 billion – January 17, 2007
Old school analysts. Let them be.
Apple’s guidence here is EXTREEMELY conservative. Worryingly so.
So were the Mac sales numbers, despite Apple spin about other years.
The word origin of ‘analyst’ is ‘anal’.
Does any serious investor care about these clowns in pin-stripes?
Yes, every one.
Please don’t SHOUT mel Gross..!
OK, it is a conservative guidance from Apple. The outcome will likely exceed Apple’s estimates and there are 3 months for the analysts to settle down. Listening in to the yesterday, I wasn’t overly impressed with most of their questions..
New products coming down the line, Leopard, a failing, dissapointing insecure Vista, of course Apple are going to have a momentous 2007.
JP Morgan have called it wrong.
Time will tell.
It’s déja vu all over again.
MW= figures (the stock would go down!)
For the long term investor Apple remains a stock that you want to have in your portfolio. My daughter is going to get Apple shares for her birthday. I’ve decided to wait for the annual late spring early summer market slump, but the way things are going I’m beginning to wonder if that’s wise. It almost looks like Apple is going to roll up its sleeves a fight to counteract the market cycles this year. Never the less, I still see shares dropping to as low as $80 or even $75 for a brief time during the course of the summer. Hmm…
better
Cheaper stock to buy
Market will catch up
MDW word :shot like here is your shot to buy
Gotta love it. Stock drops, analysts cut rating (in response). Stock rises, analysts raise price targets (in response). Hindsight is 20/20. If these guys were any good at predicting the future then they wouldn’t need our money to get rich.
I would like to see more Mac sold, too. But Apple beat the Wall Street estimate by about $500M in revenue and $0.36 per diluted share. I agree that Apple won’t see much out of the Apple TV in this quarter. And, obviously, Apple won’t see anything out of the iPhone until Q4 2007. But I believe that most analysts have overlooked MacOS X 10.5 as well as incremental upgrades to their iPods and computers and continued sales of the shuffle (my wife loves it).
Can SOMEONE please enlighten me as to why AAPL stock is DOWN 5% today?? Didn’t they just release the best quarterly statement yesterday?? I’m VERY confused.
MW: AGAIN as in the street confuses me AGAIN
AAPL continues to tank. Will keep heading south as The Street increases its expectations that Apple will be run like a real business and not as the personal, unconventional leisure time activity of its CEO.
While a media darling for a while, the light goes out on those entities in our Capitalist system that don’t focus on the reason for being and don’t operate within the law.
If I’m not mistaken, JP Morgan just a couple of weeks ago predicted that Apple wouldn’t introduce the iPhone at Macworld. Yeah, like we should listen carefully to what the analysts at JP Morgan have to say.
Don’t to be silly, MDN. Of course JP Morgan knows that Apple guides conservatively.
You can dismiss Apple’s conservative guidance, but you can’t ignore that the market has its “whisper” numbers (expectations based on previous earning surprises). You also can’t ignore that fiscal Q2 (January through March) is Apple’s weakest quarter.
For these two reasons, JP Morgan is concerned that the market’s expectations for Q2 may be too high, and that investors risk being disappointed come April.
Given that these factors predominate in JP Morgan’s analysis (other analysts may have different views), then reducing the recommendation from overweight to neutral is the right one, and a prudent one.
JP Morgan is saying: Don’t buy any more AAPL, but don’t go selling any right now either. Wait and see…
Well – How does JP Morgan make money. Is what they say intended to influence the stock market in such a way as to make more money for them? Or are they giving a completely straight analysis of Apple with no gain in mind.
Jumbo, AAPL is down today mainly because the market got ahead of itself.
AAPL rose 30% since its last quarterly report in October 2006, and 19% alone in 3 weeks as awareness of holiday sales and MacWorld picked up.
Given that kind of rapid rise, a 4-5% retracement is hardly cause for alarm. A “buy the rumor, sell the fact” reaction is part and parcel of how the markets work.
The immediate triggers for the selloff are that Apple executives warned that operating margins would drop from the last quarter’s 18% down to ~12%. This is huge for investors – the less margin, the less profit.
Additional triggers are the conservative guidance issued by Apple, fiscal Q2 being Apple’s weakest quarter historically, and lingering concerns about the still-unresolved stock options inquiries underway separately at the US Attorney and the Securities and Exchange Commission.
Market factors that come into the decline include the general sentiment that “technology is dead for the 1st half of the year” – see Jim Cramer’s remarks on Mad Money – plus Federal Reserve Chairman Benjamin Bernanke’s warnings at 10:00 ET today about the unsustainability of prudent fiscal and monetary policy given the huge ramp up in entitlement spending (Social Security, Medicare, Medicaid, student loans, etc) that is about to take place.
Potential upsides for AAPL, though, are legion: Initial AppleTV orders are robust. Revenues from AppleTV, iPhone and Leopard have not yet been factored into analysts earnings calculations. Apple’s product pipelines are strong. Apple’s balance sheet ($11.9 billion cash and cash equivalents) is the envy of Silicon Valley and Wall St. Steve Jobs looks likely to remain at the helm of Apple. Etc etc etc.
Summary: AAPL will probably consolidate sideways or have a downward drift in the forthcoming days and weeks. If it drops into the high or mid $80s, that’s a terrific buying opportunity for investors willing to hold for 1 year or longer.
donks Human, JP Morgan is what’s called a “sell-side analyst”. This means that JP Morgan runs an investment banking operation, and it has an analyst division which has Chinese walls to keep it (nominally) separate from the investment banking operation.
The consumer of sell-side analyst reports are fund managers, i.e. pension funds, mutual funds, and hedge funds. These institutional investors get a battery of analyst reports every day (upgrades, downgrades, initiations of coverage, reiterations, price target changes, etc) from a variety of sell-side analysts (including those from JP Morgan, Goldman Sachs, Merril Lynch, American Technology, Bank of America, etc).
The real profits to JP Morgan come from the investment banking side – raising capital for companies, taking them public, advising on mergers and acquisitions, recapitalizations, and the like.
Because the analysts – who are supposed to be neutral and independent – work for the same company, many retail investors are skeptical about the contents of their report.
But institutional investors have the resources (money, time, and staff) to develop relationships with these sell-side analysts over time, and know which ones are the good ones and which ones are blowing smoke for the investment banking division.
And if an institutional investor decides to buy 500,000 shares of AAPL, say after reading an analyst’s report, then maybe that institutional investor will place that buy order through that analyst’s firm’s trading desk.
As you can see, it’s a clubby world – you scratch my back, I’ll scratch yours. But it’s also a shark-eat-shark world, where relationships are all about money and long-standing ties can evaporate overnight.
Lastly, there are also “buy-side analysts”. These analysts work for investment funds or wealthy invdividuals, and their reports are almost always clear of bias or hype. But at the same time, their reports are rarely (if ever) made public, simply because their reports are considered proprietary by their employers. It is very, very hard for retail investors to get access to, or take advantage of, reports by buy-side analysts.
What are you talking about? We all emphasize a word or two at times. read some other posts.
If I capitalized all the words as some do, or even most of them, then you could have said something.
Silly point.
Hey Mel,
The reason people think you are shouting is because your comments appear as a much larger serif font as opposed to the default san serif font that most people post at. Dude to the different typestyles and size these are visualy the equivalent of the volume change when a commercial comes on TV. And you control the tags so you are setting the size.
You may not be SHOUTING, but you are definately a loud talker.
— my 2cents (no charge)
Mel
YOU’RE GROSS!
Apple is down because the broader market is down. Apple missed their sales number for new Macs so they’re being punished.
I’m considering it a buying opportunity. Why?
Upside baby. BIG UPSIDE.
If buyers don’t realize that Apple Inc is going to sell a lot of phone handsets for the highest margin in the business then they’re really stupid.
It does not take a math genius to figure out how much is going to get added to Apples bottom line when they sell all the phones they WILL sell in 2007.
Upside. Lots of it.
AAPL will be at $200 by 2008 if they don’t split first.
Fear drives the world.
Analists are morons with a vision.
DEVELOPERS DEVELOPERS DEVELOPERS DEVELOPERS!
I’ll have to check it out.
But, I don’t see it when I post, nor do I see it now, in Safari. They are all the same size.
When I see people predicting how things will go in the future, I like to see how their previous predictions turned out. Then you know who to listen to and who to ignore.
Is this smaller? If not I’ll try something else.
HD, don’t be such a fanboi. It’s not what you would like to have happen. Part of this drop is Apple’s responsibility. Like it or not, investors pay attention to company estimates. They are also not happy about the number of Mac’s sold, which is not Apple’s fault, rather it’s from overblown expectations.
They are also not happy about that little number 18 dropping to 12, according to Apple’s statement.
They aren’t thinking about the iPhone 6 months down the road. They are thinking about this quarter. The analysts are thinking about next year with their heightned (most of them) estimates.
So, calm down.
Formula: Take Apple’s initial guidance (given at the prior quarter’s earnings conference call) for the last 3-4 quarters or so, add 20% to that, and you get a number closer to actual results.
Underpromise, overdeliver, indeed.
Any selloff following earnings has proved to be a precipitous entry point for AAPL.
Wish my bathroom scale would “downgrade” me from overweight…
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