Citigroup analyst less than bullish on Apple

Apple Store“To characterize Apple’s first-quarter earnings as excellent is the epitome of understatement. In the first three months of the year, profit ballooned by 88%, to $770 million. The per-share earnings of 87 cents made Wall Street forecasts of 64 cents to 67 cents look downright conservative… There’s reason to expect the good times to last. Demand for Macintoshes and iPods is robust, and the forthcoming iPhone music-playing wireless device is expected to be a huge sales catalyst,” Arik Hesseldahl reports for BusinessWeek.

Hesseldahl reports, “Indeed, it would appear that everyone loves Apple these days, if not for the likes of Citigroup analyst Richard Gardner. He’s covered Apple for about 10 years, and even as his counterparts at other firms gushed, Gardner urged caution: Hold the Apple stock you have, but don’t buy any more, for now.”

“It’s probably not right to describe Gardner as ‘bearish’ on Apple. ‘To be clear, we have no issue with medium- to long-term fundamentals on Apple,’ he says in his note. ‘Our modeling simply suggests that forthcoming products like the iPhone are fairly reflected,” in earnings estimates,'” Hesseldahl reports.

Hesseldahl reports, “His argument is simple: Much of the good news that investors can expect from Apple, whether it’s related to the iPhone, AppleTV, Macs, or iPods, is already accounted for in the stock price.”

Full article here.


  1. The 24 month income recognition plan does not mean that the revenue deferred will not become a deferred asset on the balance sheet. The market will determine the number of units sold, within the supply constraint. It is hard to imagine that the supply will keep up with the demand. The only fly in the ointment will be if the phone doesn’t work as advertised. Presumably the related development costs will be written off as well over the 24 month period. Inevitably, revenue will be smoothed by this process, lessening the volatility factor caused by quarterly reporting. Can Apple defer its corporate income taxes as well? My guess is they are going to try.

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