Of all the tech giants who took a beating in Monday's stock market meltdown, Apple suffered the worst, dropping 18 percent and wiping $18 billion off its market cap.
What does it mean for Apple? Absolutely nothing, explains Oppenheimer & Company analyst Yair Reiner.
"I respect someone coming to the conclusion that the economy is going to turn very sour and Apple may be among the chief casualties of that," said Reiner, in a phone interview. "But I think that's a really short-term call."
Reiner said Apple's stock crash isn't going to decrease production of iPhones, MacBooks, MacBook Pros or cancel the development of a hot new product.
The only way Apple's falling share price might have an impact is if the company needed the capital to expand or make dramatic changes, which would require raising money by offering more shares. And that isn’t likely, because Apple has upward of $20 billion in its balance sheet, and the company is still trading at 21 times its earnings for 2008, Reiner said.
Apple on Monday went from being a Wall Street favorite to hitting a new 52-week low, largely because two analysts -- RBC Capital's Mike Abramsky and Morgan Stanley's Kathryn Hubert -- downgraded their recommendations, citing slowing consumer demand for Apple products.
Abramsky backed his recommendation to downgrade from "sector perform" to "outperform" with a survey his firm conducted with ChangeWave, which runs a network of 15,000 businesses. The survey suggested that the percentage of technology consumers who plan to buy a Mac dropped from 34 percent in August to 29 percent in September.
However, downplaying Abramsky's recommendation, Gene Munster of Piper Jaffray said his firm estimates a 29-percent Mac growth this quarter. Munster added that the Street's margin pressure concerns are likely "overblown" and that margin guidance will likely be above or equal to Apple's 30-percent gross margin guidance.
Meanwhile, Huberty, who cited slowing global consumer demand to downgrade her recommendation on Apple from "overweight" to "equal-weight," has in the past underestimated Apple's iPhone sales. For quarter two of 2008, for example, Huberty estimated Apple would sell 1 million iPhones, when in reality the company sold 1.7 million, according to CNN Money's Philip Elmer DeWitt. For quarter two of 2008, for example, Huberty estimated Apple would sell 1 million iPhones, when in reality the company sold 1.7 million.
Reiner stressed, however, that the recommendations of analysts are often subjective estimates, and investors remain uncertain about how the market crash will affect consumption of Apple products. Reiner said he personally remains optimistic about the tech giant, particularly because of the way the company has integrated its products into people's lifestyles.
"The long-term thesis about Apple and the reason to want to own the stock is because of the fundamental change in the way that people use [Apple] computers or that people are looking for their computers to do. It has more to do with managing their lifestyles, using videos and music and other media, and I think Apple has put together hardware and software that's much more evolved than their competitors."
He added that Apple is more susceptible in the stock market than other tech corporations because of the excitement it incites.
"Apple is a stock that creates a lot of passion," Reiner said. "Just as people can get incredibly enthusiastic about what Apple does and how bright its future is, when enthusiasm wanes there's more chance of volatility."
No comments:
Post a Comment