AmTech Maintains Neutral Rating on AAPL, Cites Economic Worries

January 12th, 2009 at 4:49 PM - Apple Stock Watch by Bryan Chaffin

Apple faces potential pressure in 2009 from the economy, and that could include lower margins, slower market share gains, and other related issues, according to Broadpoint AmTech analyst Brian Marshall. Mr. Marshall released a research note to clients Monday that examines the bull and bearish side of Apple, but in the end maintained a neutral rating on the company's stock.

"It is well known that CES 2009 was extremely somber," wrote Mr. Marshall, "and it appears business trends in the consumer electronics industry are not improving. We continue to believe that the challenging economic climate, rising unemployment levels and general lack of job security will all be headwinds against Apple's revenue and earnings power in CY09."

In order for Mr. Marshall to get more excited about Apple's stock, he wrote that he needed "clarity" on two issues: "1) resolution on [Apple CEO] Steve Jobs and his responsibilities at the company going forward, and 2) a better sense of Apple's strategy with regards to product pricing in the new year."

Mr. Jobs announcement during Macworld that he was undergoing treatment for a hormone imbalance that had caused him to lose weight wasn't enough information for Mr. Marshall, who wrote that Apple's "key man risk is non-trivial." Several analysts, including Mr. Marshall, have called on Apple to lay out a succession plan for its leadership due to concerns about Mr. Jobs's health.

As for the product pricing issue, Mr. Marshall made the case to clients that Apple's profits could be hurt by declining carrier subsidies of the company's iPhone product line, calling them "unsustainable" as time marches on. He also said the company could face declining margins going forward.

He acknowledged that Apple was looking at lower component costs in 2009 -- a factor which would normally boost margins -- but cited concerns that the ailing world wide economy would cause Apple to have to cut prices, lowering margins in the process, in order to maintain its market share for Macs, iPhones, and iPods.

On the upside, though, Mr. Marshall wrote that he still expects Apple to release a less expensive "iPhone nano," a product that could add $3.4 billion in sales in 2009 and $.90 per share in earnings.

Apple will announce its December quarter earnings on January 21st, with The Mac Observer providing full coverage of both the announcement and the subsequent conference call with analysts.

Apple ended the day at $88.66 per share, a loss of $1.92 (-2.12%), on light volume of 21.96 million shares trading hands.

*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.