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On October 3, the shares of Apple Inc. (NASDAQ: AAPL) dropped below the $100 mark for the first time since May 2007. In fact, the stock dropped last Friday to a new 52-week low of $85, representing a 19-month nadir for the iPhone parent. Today, this price plunge served as the catalyst for a valuation-based upgrade from Bernstein.
In a note to clients, Bernstein boosted its rating on AAPL from Market Perform to Outperform, and said that its "longer-term growth story remains intact." Analyst A.M. Sacconaghi added, "Investors appear to be valuing Apple on an earnings multiple, rather than on cash flow, which fundamentally undervalues the company given the huge deferred revenue growth associated with the iPhone."
Specifically, the brokerage firm estimates that the iPhone itself could add between $2.25 and $3.40 per share to cash flow above earnings in fiscal 2009.
However, following the stock's recent free-fall down the charts, Bernstein was forced to trim its price target on AAPL from $175 to $135. Credit Suisse followed suit, slashing its price target on the equity from $200 to $135. Despite today's gain of about 7% amid a massive rally in U.S. stocks, Apple shares could be vulnerable to more price-target cuts during the near term. Thomson Financial pegs the average 12-month price target at $176.33, a lofty premium of 82% to Friday's close at $96.80.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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Reader Comments (Page 1 of 1)
10-13-2008 @ 1:09PM
Beltway Greg said...
Sticking to $260 but for eoy 2009. Obviously the near collapse of the banking system has affected price targets on everything. Even utility companies are going to give you 10-15% if we survive. Near-term, six months, $150. If the WalMart rumours are true this could be prove to be ridiculous.
BTW, time to vacation in Iceland. See you at the Blue Lagoon with or without Brooke Shields, it's your call.
Beltway Greg
10-13-2008 @ 2:35PM
Dr Bob said...
The equity analysts these days are clueless and essentially incompetent. They change their "price targets" on a weekly basis...usually right after another analyst does it (what a coincidence that both Bernstein and Credit Suisse come up with the SAME price target for AAPL).Don't bother to invest based on their advice...since so far they've been spectacularly wrong - and you would have lost A LOT of money this year. For example, if you have followed these guys' advice to buy AAPL all the way down to where it is now, most of your investment is underwater...and, apparently, you'll be lucky to simply recover your money in 12 months (if it ever gets to $135).
Watch for these same "experts" to lower their price targets in a few months (but reiterate their "buy" recommendation)...AFTER the stock price has dropped to $75, of course.
10-13-2008 @ 3:29PM
ryan said...
The price targets for AAPL in the past weeks have been all over the place. There finally above 100, but who knows how long this can last even though sentiment is strong (http://www.predictwallstreet.com/stock/AAPL) everyone is seeing a good day this Monday, but some of this is overly optimistic.