If you are an Apple disciple now is a time of internal conflict. Retailers like Best Buy, Walmart, Radio Shack and Target just cut the price of a brand-new iPhone 5 by $50 or more. So you can get the latest shiny phone for less. Meanwhile, Wall Street analysts from Pacific Crest, Canaccord Genuity, Mizuho Securities, UBS, Jeffries all cut their price targets for Apple stock in the past few days, generally slicing off in the neighborhood of $50 to $100. So maybe your Apple investments will be worth less.
What is an Apple believer to do? Do you buy the phone and sell the stock?
It’s not a coincidence that the two price cuts are happening at the same time. If the iPhone 5 sales were as explosive as retailers and Apple had hoped, no one would be offering such a hefty discount. It’s hard to remember the last time Apple allowed its latest and greatest gear to be sold for anything less than the price it determined so soon after launching.
Wall Street is thinking the same thing, though it is more focused on worldwide sales than how long the line is today at your neighborhood Target. What the investor set is seeing is a global market that has plenty of choice when it comes to smartphones (Samsung has some pretty swank offerings, for example), and a sense that maybe the iPhone is reaching a saturation point.
“Global consumer demand for iPhone 5 is not as strong as we anticipated,” writes Pacific Crest’s Andy Hargreaves in a note to clients. “Although we believe iPhone 5 remains the best-selling high-end smartphone on the market and is likely gaining significant share right now, a combination of market saturation, weak global demand and incremental innovation that has surpassed consumer demand are likely negatively impacting iPhone sell-through.” Meaning, the iPhone 5 is not selling as many boatloads as everyone expected.
Doing his analyst thing, Hargreaves adjusted his 2013 iPhone estimates from 174 million gizmos sold to 151 million, and 2014 estimates from 181 million to 161 million. All of which leads Hargreaves to set a new price target for Apple shares at $565, down from $645.
Other analysts offered the same general reasons for cutting price targets, some with a little iPad mini cannibalization thrown in. Canaccord Genuity’s Mike Walkley cut his price target from $800 to $750. Mizuho Securities’s Abhey Lamba cut his price target from $750 to $600. Glen Yeung with Citigroup cut his price target from $675 to $575. (He also cut his rating from “buy” to “neutral”). You get the picture.
As is the case with all investments, there are other analysts on Wall Street who believe there is nothing to see here, and are standing by $780 and even $800 price targets. That school of thought contends that global iPhone demand remains strong, and to turbocharge shares in the future there is a cheaper iPhone and an Apple TV on the horizon. Apple will rise as it always does. Which on Tuesday it certainly did, up almost $12 to $530 in midday trading.
Now, that is still far from its September highs around $700, but for the year Apple is still up 31 percent. And with the exception of Citigroup’s Leung, the vast majority of analysts, those who lowered price targets or not, still have a “buy” rating on the stock.
Which makes your ultimate decision an easy one. You buy the phone and the stock.
