Here's what 11 Apple analysts are saying about the sales flop and the plunging stock

Gene munsterBloombergTV via YouTubePiper Jaffray’s Gene Munster isn’t fazed. He’s a buyer on the sell-off.

Apple reported a massive quarter with $US49.6 billion in revenue and earnings of $US10.7 billion of $US1.85 per share. That earnings number beat analysts’ expectations for $US1.81 per share.

However, Apple shares are getting wallopped, plunging 6% after the results.

During the period, iPad sales fell 18% to 10.9 million units. But what really caught everyone’s attention was the 47.5 million iPhones that were sold. While it was up 35%, it fell short of analysts’ expectations for 48.8 million. There was even a “whisper” number out there suggesting that investors and traders were looking for 50 million iPhones sold.

Is the price move justified?

Wall Street analysts covering Apple are split. Of the 11 research notes read by Business Insider, 6 analysts maintained a “Buy” or “Outperform” type rating on the stock. The remaining 5 were neutral.

Here’s some of what they had to say:

Piper Jaffray: BULLISH

Rating: 'Overweight'

Price Target: $US172

Comment: 'We are buyers on the 6% aftermarket pullback on shares of AAPL based on the belief that Apple will continue to gain share in the high-end smartphone market and margins will expand into the S cycle resulting in Street numbers inching higher over the next several quarters. While some investors will view the 48.1 million iPhones (ex channel drain) as a disappointment below investor thinking for more than 49 million units, the reported unit sales represent significant market share gains. For the Watch, we estimate Apple sold around 2.5 million units, which was in-line with investor expectations.'

Goldman Sachs: BULLISH

Rating: 'Buy'

Price Target: $US163

Comment: 'Given the revenue, iPhone unit and EPS upside seen in the past two quarters, investors were likely looking for sharper upside. With that said, we viewed this as a solid performance for the tail end of the iPhone 6 cycle, and investor attention is likely to quickly shift toward the iPhone 6s refresh later this quarter. While the next iPhone family faces a tough set of comps, we continue to believe there is upside to expectations -- particularly on gross margins.'

Morgan Stanley: BULLISH

Rating: 'Overweight'

Price Target: $US155

Comment: 'With demand strong despite these price increases in many regions, we see a path for channel inventory build in 2H15 that further supports our view that iPhone units can grow Y/Y. We like the set-up created by 1) lowered expectations, 2) lower than target channel inventory, 3) 73% of the installed base yet to upgrade to larger screen iPhones, which we believe can drive iPhone unit growth in FY16, and 4) continued strong international demand data points.'


Rating: 'Buy'

Price Target: $US145

Comment: 'iPhone units of 47.53 mln (+35% y/y) above street at 47 mln (but below whisper number of 50m+ units) with Average Selling Price at $US660 above consensus at $US634, underscoring our belief that purchases are at higher price point thereby driving gross margin higher.'

Credit Suisse: BULLISH

Rating: 'Outperform'

Price Target: $US145

Comment: 'Given high retention rates, a superior ecosystem, and multi-product compute advantage, we believe such elevated level of earnings and (free cash flow) of around $US64bn per annum should be sustainable long term.'

William Blair: BULLISH

Rating: 'Outperform'

Price Target: NA

Comment: 'Bottom line, we recommend investors use any pullback in the stock as a buying opportunity. With a weak competitive landscape at the high-end smartphone market (and Samsung struggling), combined with continued desire to seek higher-end capable smartphones (even in emerging markets), we believe Apple will continue to strengthen its competitive position.'

Jefferies: NEUTRAL

Rating: 'Hold'

Price Target: $US135

Comment: 'Our checks at MWC-Shanghai suggest Apple is facing strong competition on a technology basis, from lower-priced Android-powered Smartphones, particularly from Huawei and Xiaomi ... We could become more constructive with evidence that Apple is fortifying its brand through superior technology and/or value, potentially through new product categories (e.g., electric car), success in Watch, or Cloud Services. '

Deutsche Bank: NEUTRAL

Rating: 'Hold'

Price Target: $US125

Comment: 'We continue to remain concerned that AAPL's smartphone market share is peaking, and expect iPhone unit growth to decelerate next year on more difficult compares. With shares trading near historical average PEs, we view valuation as fair and reflective of the slower growth potential in FY-16.'

Pacific Crest: NEUTRAL

Rating: 'Sector Weight'

Price Target: NA, $US139 (12-month fair value)

Comment: 'We see the risk/reward on AAPL as slightly positive. The stock may lack near-term catalysts as investors digest the potential for iPhone units to decline in the first half pf F2016, but the stickiness of the iPhone user base should prevent material downside.'

Raymond James: NEUTRAL

Rating: 'Market Perform'

Price Target: NA

Comment: 'It is hard to call anything bad or ugly this quarter, but coming off some truly exceptional quarters in December and March, June was clearly less ebullient. It appears Watch revenues were ~$US1.1 billion, probably consistent with 2-3 million shipments, gross margin guidance in September was weak, and management went out of their way to talk about GM headwinds in the forthcoming quarters from FX as well iPad units continued to decline, down 18% y/y, with iPad ASPs down 7% as well. Guidance was essentially in line, which is fine but very different than the previous two quarters.'

Wells Fargo: NEUTRAL

Rating: 'Market Perform'

Price Target: NA

Comment: 'The (iPhone sales disappointment) raises the question of whether slowing demand is the cause for keeping inventories low (though on the flip side, lower channel inventories means less channel price protection into the next cycle)... We believe the positives of the current 6 cycle and perception as a relatively defensive stock to be offset by gross margin pressures and secular issues as it relates to a limited market cap opportunity in the existing product segments, and a potential balance of power shift back to wireless operators from handset vendors.'

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