Notable Calls

BMO Capital is out cautious on Apple (NASDAQ:AAPL) having recently visited or spoken with sales reps at 32 Apple and 30 AT&T stores in various parts of the US and the UK. Apple is not escaping the gravity of weakening consumer spending, in firm's view.

Negative – for the first time in years, store reps are indicating sales have slowed, in CPUs in particular. While the data was not universal, about onethird of sales reps they spoke with noticed some slowing, which is a significant change from past checks. Conversations with AT&T sales reps indicated no recent change in iPhone run rates, but the firm has elected to cut their FY2009 iPhone forecast nonetheless.

In recent visits to 32 stores across the country, 11 indicated that sales had slowed in the past 30 days, while 20 indicated that sales had stayed about the same, and one indicated that sales had improved. While store checks might not seem that negative, over the past five years of checking Apple stores, wthey have received consistently steady and/or improving sales comments. This is the first time they have heard store reps describe slowing sales since Apple began its stock run five years ago. In addition research provided by ChangeWave Research indicate slowing sales.

How Might Apple Guide for the Dec Q?

The question is not if Apple will guide below Street estimates, but how far will Apple guide
below Street estimates. For example, for the September quarter, the firm suggested that Apple would guide to $1.00 when Street estimates were approximately $1.30 – too great of a delta, and the stock sold off. For this quarter, with the inclusion of significant deferred revenues, they believe estimating quarterly guidance is more difficult.

BMO's analysis suggests that Apple would guide to around $10.0 billion in revenue vs. the Street at $10.8 billion and their $10.1 billion estimate. They also believe that Apple will guide EPS in the range of $1.45-$1.50, compared with current Street estimates of $1.71 and their $1.60.

Maintains Outperform on AAPL due to stock’s recent decline relative to their target price of $120.

Notablecalls: Not making a call here but letting you know it's out there.