Merill Lynch

Barclays, Citi lower Apple price targets. Merrill is standing pat

March 6, 2013: 11:41 AM ET

Barclays met with Apple execs. Citi asked suppliers. Merrill searched Google Trends

chart_ws_stock_appleinc_201338102617_240xaFORTUNE -- Apple (AAPL) gave up most of Tuesday's $9.66 (2.3%) gains in the first half hour of trading Wednesday after three analysts issued tepid reports:

  • Barclay's Ben Reitzes lowered his Apple price target to $530 from $575 after meeting with two senior VPs -- Phil Schiller and Peter Oppenheimer -- although he insists that his 8% reduction had nothing to do with what they said. He actually came out of the meeting convinced that, as he put it, "Apple's ecosystem is solid – and has room to grow in both existing and new devices."
  • Citi's tag team of Glen Yeung, Jim Suva and Walter Pritchard retained their "contrarian" neutral rating on Apple and lowered their near Street-low $500 price target to $480 based on "evidence of reduced demand to Apple's suppliers" for both iPhone 5 and 10-inch iPad parts. They add that "despite much speculation amongst investors and 3rd party research, we find limited evidence of a low-end iPhone at this stage."
  • Merrill Lynch's Scott Craig is sticking with his $570 price target, but in a search of Google Trends -- which tracks the frequency of search terms -- he found some worrisome, well, trends:

1. In iPhone 5 cycle, search volume for the keyword "iPhone" is moderating sooner and normalizing at lower levels vs. previous cycles. This could be explained by competition and Apple's greater efficiency in global product rollout.
2. Query volume for the iPhone remains above Samsung's high-end models, but the gap is narrowing. The iPhone is still the bestselling model globally, but the difference between iPhone 5 units and Galaxy S3 & Notes 2 units narrowed to 8mn in Q12 vs. ~17-18mn in the last cycle.
3. Query volume for the iPhone is beginning to trail Samsung Galaxy in some emerging markets (China, India), perhaps due to Apple's lack of exposure in the low/mid-range segment.
4. iPad remains dominant in both keyword search volume and overall unit/revenue share.

According to Thomson/First Call, the average Apple analyst's price target is $630. On our spreadsheet it's $613.

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