Apple ‘feeling the heat’
A band of AppleInc.’ s most bullish fans on Wall Street are growing increasingly bearish over concerns that holiday iPhone sales have been weak and that the company needs new breakthrough products to fend off rivals Google Inc. and Samsung Electronics Co.
At least five analysts have cut their price targets for Apple since Sunday, with some saying Apple’s purchases from suppliers indicate iPhone and iPad sales may not meet projections. Because the two products are Apple’s largest sources of revenue and profit, any slowdown in demand would bode ill for growth prospects.
The reports from Citigroup Inc., Pacific Crest Securities, Mizuho Securities USA, BMO Capital Markets and Canaccord Genuity mark a reversal from earlier this year, when analysts were racing to issue upbeat predictions, with at least two saying Apple would top $1,000. Instead, the shares have dropped more than 25 per cent from a September record amid speculation the iPhone is saturating the market, ratcheting up pressure on chief executive officer Tim Cook to introduce a new hit product.
“Apple is feeling the heat,” said Michael Obuchowski, a portfolio manager at North Shore Asset Management LLC, which owns Apple shares. “There is a lot of pressure on Apple to bring new magical devices to the market, and that hasn’t happened in a while.” He said the latest iPhone and iPad mini are incremental improvements on previous devices.
Apple, based in Cupertino, Calif., closed at $533.81 in New York Tuesday, up 2.8 per cent. Glen Yeung, an analyst at Citigroup, wrote in a note on Dec. 16 that Apple’s Asian suppliers have been reporting cuts in orders, raising questions about the iPhone 5’s strength. The bank reduced its rating on Apple’s stock to neutral from buy and cut its price target to $575 from $675.
With Apple projected to have won 230 million iPhone users by the end of the year, the company’s customer growth will start to ebb because it is approaching a saturation point, said Andy Hargreaves, an analyst at Pacific Crest Securities in Portland, Ore.
Apple’s sales also may be less than some analysts predict because it is selling more lowerpriced items, such as the new iPad mini, instead of the newer, high-end models, said Abhey Lamba, an analyst at Mizuho, who cut his stock-price projection to $600 from $750.
“There is definitely a need for the next big thing,” Mizuho’s Lamba said in an interview.