Apple's Market Share Momentum

by: FP Trading Desk October 22, 2008 | about stocks: AAPL    

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Apple Inc.’s (AAPL) fourth quarter results came with a dose of caution given the economic uncertainty it faces, but analysts remain optimistic based on the company’s solid market position, particularly given impressive iPhone shipments of 6.9 million.

Earnings guidance for the first quarter came in below Apple’s typically conservative outlook at $1.06-$1.35 per share, well below the Street at $1.67. Revenue in the range of $9-billion to $10-billion compared to the Street at $10.7-billion, with both factoring in a possible Christmas slowdown.

JPMorgan analyst Mark Moskowitz told clients:

We appreciate the reset to expectations and continue to believe that the company’s model ultimately will weather the macro storm better than most of its peers.

He maintained an “overweight” rating on the stock.

Mike Abramsky at RBC Capital Markets said in a research note:

We still believe that Apple’s market share momentum in Macs, iPods, and iPhones could help the company weather the macro storm better than most of its peers in coming quarters.

He maintained a “sector perform” rating on Apple but cut his price target from $140 to $125.

Despite the fact that Apple’s valuation has corrected to 18 times forward 12-month price-to-earnings and it continues to have strong fundamentals, challenges like disappointing guidance, lower visibility, declining gross margins and the chance of slowing Mac and iPod growth have increased, Mr. Abramsky said. As a result, he expects the shares will remain range-bound and volatile until growth and margin trends become clearer to investors.

Mr. Moskowitz said iPhone revenues and earnings figures associated with that business point to a major revenue and cash flow generator beyond the long term, which could offer a backstop to valuation. “Despite the macro, we think this strength of the iPhone model could keep investors interested in coming weeks,” he said.

Meanwhile, the macro uncertainty and Apple’s $25-billion cash war chest could present “extraordinary opportunities,” according to CEO Steve Jobs, so stay tuned.

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This article has 2 comments:

  •  
    Oct 22 12:01 PM
    Haven't had a chance to read the earnings transcript. Did Apple give non-GAAP guidance for next quarter? Those would be an interesting numbers to have as I'd guess expected earnings are above $1.67/share.
    Reply | Link to Comment
  •  
    Oct 22 12:51 PM
    Same as the question I ask from Will Ritter.
    Did Apple give non-GAAP guidance for next quarter?
    Reply | Link to Comment
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