Analysts Bullish on Apple, AAPL Climbs Slightly

by , 12:40 PM EDT, April 24th, 2008

Despite a strong earnings report on Wednesday with substantial growth and strength in all markets, Apple stock declined by a few percent in over night trading but has recovered slightly on Thursday. Most analysts who watch Apple remain bullish.

A few analysts are concerned about Apple's apparent inability to convert lower component pricing for DRAM and NAND memory into higher gross margins. Apple explained on Wednesday that there were some factors that offset lower component process and reduced the gross margin more than analysts expected.

Despite the nits, the analysts who watch Apple were upbeat on Thursday:

Charlie Wolf, Needham & Company: "There was only one story in the quarter - Mac sales. In a PC market that experienced 12% growth, Mac shipments rose 51%." Mr Wolf maintained a Buy rating and US$235 target price.

Shaw Wu, American Technology Research: "This is the least upside for gross margin vs. guidance and first miss vs. consensus view in quite some time. One may beg the question of whether AAPL has lost its unparalleled ability to capitalize on declining component prices ... this could remain a lingering concern.” Mr. Wu maintained a Neutral rating.

Andy Hargeaves, Pacific Crest: "Accelerating growth suggests products and brand strength can offset macro weakness." He maintained an Outperform rating, target to US$225 from $210.

Richard Gardner, Citigroup: "Apple remains our top hardware pick through calendar year-end." He maintained a Buy rating, and raised the target to US$248 from $212.

Toni Sacconaghi, Bernstein Research: "Gross margin failed to show the upside we expected…as expected, guidance for Q3 appears conservative." Mr. Sacconaghi thinks that unlocked iPhones could account for 30 to 50 percent of total sales, however, Apple has steadfastly declined to estimate the real number. "We believe that Apple’s stock is relatively fairly valued at current levels, and would look to add only on pullbacks." Mr. Sacconaghi said.

The consensus is that about half of the analysts see a very upbeat year for Apple especially in light of the iPhone 3G prospects worldwide, iPhone 2.0 software, and escalating Mac sales. The rest are concerned over some of the details of Apple's financials and seem to be lost in nits compared to the fact that Apple's growth, year over year, was 43 percent and the Mac sales are growing at 3.5 times the PC growth rate.

In morning trading AAPL is climbing slightly and is at US$167.32, up $4.43.

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In the interest of full disclosure, the author holds a small share in AAPL stock that was not an influence in the creation of this article.