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Apple Inc. Message Board

  • deeelbydesign29 deeelbydesign29 Dec 16, 2012 8:22 PM Flag

    UH OH looks like KASS' tweet wasnt bogus

    Citi's Apple Coverage Tag Trio Downgrades AAPL To Neutral, Price Target Cut By $100 To $575

    Apple, Inc. (AAPL)NT Cuts Bring Risks Increasingly Into Focus – Downgrade toNeutral Quick Call— Citi Research is downgrading the shares of Apple Inc. to Neutral fromBuy. As articulated in our recent initiation (seeExperiencing Growing Pains but atNear-Term Trough), our previous Buy rating was trading oriented, reflecting our expectation for a near-term rally (after a substantial sell-off) on strong iPhone5sales. However, near-term supply chain order cuts, while inconclusive in nature,bring into question the strength of iPhone5 and refocus investors onto risks in the Apple story. As such, we see the likelihood of any near-term rally as diminished,and, in keeping with our original thesis, downgrade the shares to Neutral. Based onthe trough analysis in our initiation, Apple shares are approaching valuations whencomparables (other 4% of S&P companies, other companies with similar deceleration) were at trough prices. While this argues for an eventual rebound, weexpect shares to remain range-bound for the foreseeable future. The Data Points— We have just returned from meetings with the hardware supplychain in Asia. While early in the week, we would characterize the Apple supply chainas optimistic about 1Q13 prospects, by week’s end evidence of Apple order cuts tosome suppliers had emerged. In keeping with this, Citi Research cut its estimatesfor Hon Hai Precision (2317.TW) – seeTech Chain Reaction. We revise lower our Apple estimates as per the summary of model changes section below. Our Take? Some Supply…— While the reasons for Apple’s cut are unclear to thesupply chain, we suspect it results from a combination of supply & demand issues. Aswe wrote on 11/28/12 (seeiPhone5 Availability Improving Lending Confidence toQuarter; Mini Yields Set to Improve), supply of iPhone5 has improved. Our checkssuggest Apple has seen a 45-50% increase in monthly iPhone5 production outputOctober to December. While some of this increase was anticipated, our discussionswith various points in the supply chain indicate yield improved faster-than-expected.Given that Apple would likely double order in periods of low-yield, order cuts as yieldsimprove seem reasonable. As we noted in our initiation, we see execution risk for Apple as it decreases the time between new product introductions on larger volumeseach time: we believe this kind of supply chain disruption is indicative of this. …And Some Demand— But noting that it is unlikely that Apple is cutting orders ina “great” demand environment, (continued below…) Company Update Rating Change Target Price Change Estimate ChangeGlen Yeung+1-415-951-1885glen.yeung@citi.comWalter H Pritchard, CFAwalter.h.pritchard@citi.comJim Suva, CPA jim.suva@citi.comC. Adeline LeeDelos Elder Neutral 2from Buy Price (14 Dec 12) US$509.79Target price US$575.00from US$675.00 Expected share price return 12.8%Expected dividend yield 2.1%Expected total return 14.9%Market Cap US$479,559M Price Performance(RIC: AAPL.O, BB: AAPL US) EPS Q1 Q2 Q3 Q4 FY FC Cons2012A13.87A 12.30A 9.32A 8.67A 44.15A 44.15A2013E11.97E 10.72E 8.44E 10.63E 41.75E 49.27EPrevious 12.11E 12.74E 11.68E 12.68E 49.21E na2014E13.88E 13.36E 11.66E 11.73E 50.63E 57.83EPrevious 16.55E 14.27E 13.39E 14.78E 58.99E na2015E14.61E 13.36E 12.26E 13.49E 53.71E 64.45EPrevious 18.41E 15.24E 14.02E 15.82E 63.47E naSource: Company Reports and dataCentral, Citi Research. FC Cons: First Call Consensus. Citi Research Equities

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