Apple Inc. (NASDAQ:AAPL) has seen its stock take a huge hit over the last four months, having lost nearly 30 percent of its value since reaching its all-time high of $705 per share in early September. At one point the stock fell below $500 per share, before settling at $504.77 a share Tuesday. One firm placed a Buy rating on the Apple stock, but in a research note the firm cut its price target by $50, to $650 per share. Why?
UBS believes that Apple's legendary margins just might be compromised in the near future.
UBS analyst Steve Milunovich posted a research note about Apple Inc. (NASDAQ:AAPL) Tuesday, noting a recent survey that suggested consumers are moving away from premium-priced smartphones toward lower-priced phones with less memory. The survey of consumer behavior reported that storage demand in smartphones have dropped from 35 GB in the iPhone 4S to 20 GB in the iPhone 5. The survey also noted that there is relatively little demand for the 64-GB model of the i5. This means, Milunovich notes, that the market may dictate that Apple will likely see its average sales price for iPhones would move lower, cutting into margins.
“We expect a 2-6 percent year-over-year decline in iPhone average selling prices the next three quarters. As a result, we have shaved one point off our full-year gross margin (estimates) to 39.4 percent, with a high of 40.7 percent in September,” Milunovich wrote.
Despite that, Milunovich is still bullish on Apple Inc. (NASDAQ:AAPL). “Still, we maintain our buy rating in the belief that risk-reward is favourable [sic] given improving growth, a China Mobile deal by calendar fourth quarter, and skepticism about innovation,” he said. As for the stock price, he wrote that he didn't think that it has hit bottom quite yet, estimating EPS to be down for the most recent completed quarter and the first quarter of 2013, to be followed by double-digit growth after that.
What is your take on Apple Inc. (NASDAQ:AAPL). Is this a good time to buy, or is there more selling to come? We'd love your thoughts in the comments section below.
DISCLOSURE: I own no positions in any stock mentioned.
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