Apple's recent stock slide has elicited different opinions from two analysts on the near-term prospects for the company.
In an investors note released yesterday, Citi analyst Glen Yeung lowered his rating on Apple stock to Neutral from Buy. Citi initiated coverage of Apple last month, issuing a Buy rating based on an expected recovery from the stock's then "near-term trough."
But with the share price now below $500, Yeung now sees the "likelihood of any near-term rally as diminished." Though he expects the stock to eventually rebound, he thinks it will hover around its current range for the foreseeable future.
To back up the downgraded rating, the analyst cited a cutback in supply chain orders by Apple. Such a cutback does show that supply has caught up with demand. But since Apple would be unlikely to cut orders if demand were great, Yeung sees this as a sign that demand is simply "good not great."
Based on supply chain checks, the analyst also finds that competition from Samsung is rising, weakening some of the appeal of the
iPhone 5.
Finally, Yeung sees healthy demand for the
iPad Mini, but at the expense of the iPad 4. Again based on supply chain checks, he expects iPad Mini production to rise to 12-14 million units in the March quarter. At the same time, production of the 4th-gen iPad is likely to drop to 5-7 million units. And Apple is facing competition from other
tablet vendors.
"More broadly, we view tablet innovation as increasingly difficult, opening room for alternative solutions to iPad and creating risk of further market share loss," Yeung said. "Our survey here shows that tablets under $300 are driving the majority of incremental demand as compared to six months ago."
Apple's longer-term prospects look more promising, as the analyst cited the impact of several potential new products next year, including an iPhone 5S in the second quarter, a Retina Display iPad Mini in the second half, an iPad 5 in the second half (and one designd to compete with ultrabooks), and a large-screen iPhone or an iPad with a phone in the second half.
In rebuttal to Citi's opinion, Morgan Stanley analyst Katy Huberty painted a rosier near-term picture for Apple in a report out this morning.
Demand for the iPhone and iPad remain strong, according to Huberty.
Based on a consumer survey, anticipated iPhone sales in the U.S. for the fourth quarter have beaten Morgan Stanley's forecast. And the iPad has retained a stable 50 percent market share despite expectations of a drop next year.
"A greater percentage of consumers plan to purchase the higher priced iPhone 5 as compared to iPhone 4S mix a year ago," the analyst said. "iPad share is expected to remain at 50 percent, better than our forecast of a six-point share drop in 2013 and despite more low-priced offerings from competitors."
As a result, Huberty believes that Apple's current stock price is unjustified in light of the estimated sales and earnings growth in both the near term and long term. She expects the share price to push higher and forecasts a 12-month target price of $714.
Dueling analysts differ on Apple's prospects ahead
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Dueling analysts differ on Apple's prospects ahead
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Dueling analysts differ on Apple's prospects ahead
