Thursday, January 15, 2009

Apple (NASDAQ:AAPL): Downgraded to Underperform at RBC

RBC throwing in the towel in Apple (NASDAQ:AAPL) downgrading the stock to Underperform from Sector Perform and lowering their tgt to $70 from $125.

They see a revaluation in Apple shares towards the market multiple, on reduced earnings growth expectations and near-term uncertainty re leadership.

Leadership Void. CEO Jobs' unexpected leave of absence raises near-term uncertainty re leadership. Jobs is widely viewed as Apple's chief innovator, dealmaker, leader, deeply involved in minute decisions, inextricably tied to Apple's brand. Jobs' being sidelined for 6 months or more and unavailable day-to-day -- with no clear successor -- in RBC's view raises risks to Apple's sustaining its stellar record of innovation going forward.

Declining Visibility to Growth. Proprietary data indicates further deterioration next 90 days in consumer electronics and Apple-related spending; January RBC IQ / Changewave survey data (3,500) shows only 28% of respondents planning to purchase a Mac laptop next 90 days, down from 33% Nov. Separately, 30% plan on buying iPhone 3G in Dec, down from 34% in Sept.

Lowering Financial Estimates, Q1 Preview. On deteriorating demand, F09 estimates become $36.2B rev and $5.00 EPS (prior $38.1B, $5.07). For Q1 (reporting Jan 21), they expect $9.8B rev (up 2% Y/Y) vs $9.9B street on 4.5M iPhones, 2.5M Macs, 20.4M iPods. GAAP EPS is expected at $1.48, vs. $1.39 street.

Notablecalls: Just wanted to let you know it's out there. No trade here, in my opinion (Even if there was one I probably wouldn't take it).

Also, note that RBC is the most negative firm out there this morning with other Tier-1 firms defending AAPL.

1 comment:

The HardHead said...

RBC - stinks as bad as Morgan Stanley on Apple. I hate to sound mean but what Apple needs right now is "NO" Steve Jobs. Taking medical leave is the next to the best thing that could happen - he should RETIRE.

What should hit you in the head is this comment, "Changewave survey data (3,500) shows only 28% of respondents planning to purchase a Mac laptop next 90 days."

Apple is in over 70 countries - maybe all 3,500 in the survey came out of Rockwell, Maryland.

NOTE: The Street is expecting sales to increase 11.8%, or $3.8B to $36.3B (FY09) vs. $32.5B (FY08). By default, Apple’s sales will increase $3.5B from recognizing 4.85B in current deferred revenue. Apple will also take in around $400 million from iPhone carrier payments and $650 million in investment income. Thus, even with out making a single sale in FY09, Apple will still post nearly $6B in revenue.