Analyst: Missed the Apple rally over the past year? Here’s your second chance

“Apple’s bear-territory brushes are clearly immaterial to Topeka Capital analyst Brian White, who reiterated a price target on the stock [$1,111] on Thursday that is more than double current trading levels,” Aabha Rathee reports for Wall Street Cheat Sheet. “White said the current trend simply represented a correction. ‘Similar to other corrections in Apple’s stock, the fears in the back of investors minds come to the forefront and the bear stories gain credence,’ White wrote in a note to clients on Thursday. ‘We have heard it before, we’re hearing it now and we expect to hear it again in the future. However, these concerns have proven dead wrong over the years and based on the product lineup at Apple, we believe they will be dead wrong in the foreseeable future.’”

Rathee reports, “White points out that the drop is similar to three other corrections seen by Apple in the past 13 months – falling 16 percent from September through October last year, 15 percent from October through November 2011, and 19 percent in April to May this year… He also said that tax-related selling was hurting the stock price, with investors preparing for the upcoming fiscal cliff by selling now. Taxes on investment returns and dividends are set to go up at the start of 2013 unless the government works to prevent the automatic switch.”

Rathee reports, “However, heading into the traditionally positive holiday season, Apple was likely to recover fast, White said, adding that this was an opportunity to buy. ‘We believe that those investors that have missed the Apple rally over the past year are presented with a very attractive entry point heading into the strong holiday news season,’ he wrote.”

Read more in the full article here.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

Analysts cut Apple price targets on company’s weak margin outlook

“At least three brokerages cut their price targets on Apple Inc by up to $50 a share after the iPhone maker surprised analysts by forecasting lower gross margins for the current quarter,” Supantha Mukherjee reports for Reuters. “For the December quarter, Apple forecast revenue of $52 billion, below estimates of $55 billion, according to Thomson Reuters I/B/E/S. It expects margins of 36 percent, far lower than analysts’ expectations of 43 percent.”

“Apple’s forecast decline in gross margin, even assuming it was deliberately aiming low, still pointed to an unusual decline, Evercore Partners analysts Rob Cihra and Edison Yu said in a research note. Evercore cut its price target on the stock to $775 from $800,” Mukherjee reports. “Nomura Equity Research said it expected production costs to rise in the current quarter, after Apple redesigned so many of its products at once. ‘The iPhone 5, iPod Touch, iPod nano, iPad mini and iMac all feature new form factors and our checks with the supply chain indicate that many of these are very complex to manufacture and are likely resulting in reduced production efficiencies,’ Nomura analysts said in a note as they lowered their price target to $660 from $710.”

Mukherjee reports, “Apple said it expects 80 percent of revenue in the current quarter to come from new products but did not increase the product prices to offset higher costs and maintain its margins. Analysts, however, expect gross margins to recover by June next year as rising volumes trim manufacturing and component costs. When the iPhone 4 was launched, Apple suffered a 480 basis point decline in corporate gross margins but it recovered entirely within two quarters, Raymond James analyst Tavis McCourt said. He cut his price target on the stock by $30 to $700.”

Read more in the full article here.

MacDailyNews Take: New products cost more to make initially and Apple expects 80% of revenue to come from brand new products, hence the company’s margin guidance. Nothing could be less mysterious. There’s no reason to cut 12-month price targets on Apple Inc.

Related article:
Apple beats Street on revenue, misses on EPS – October 25, 2012