You're watching...
Pacific Crest Securities’ Andy Hargreaves on investor and analyst concerns about Apple’s outlook.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Apple's first quarter earnings report disappointed investors triggering more than fifteen analysts to downgrade the stock.
Now we've got an analyst who was ahead of the game he cut his rating last week.
So what did he see -- another analyst miss -- -- -- Pacific Crest Securities senior research analyst joining us.
Now -- -- to you windy but I gotta I gotta throw out some reversed kudos to people like Jefferies they cut their target price today.
To 500 from 800 dollars soc gen do in the same Deutsche Bank Barclays the list goes -- -- not.
My question is this is not some little stock where you do see these dramatic ups and downs this is the biggest used to be up until today the biggest stock in the world.
How can you have from Dave from one data -- -- -- -- 40%.
Target price drop I mean where war these analysts.
You're gonna have to ask them that.
But -- -- eleven and let me just -- that question a little better because there -- a lot of stockholders of apple.
Who say you know if to have that dramatic a drop of 40% target price dropped.
In one day shows a lot of analysts were asleep at the -- do you agree.
Com -- you know quite honestly to a certain extent I do agree I think he had a lot of analysts that.
We're believing in products that didn't exist we're believing in.
Growth numbers that weren't real just based on our we're never gonna be real based on the amount of money that exists in the world -- had a lot of expectations that that him.
The greatest of companies of all time couldn't couldn't meet.
All right will come in my anatomy AB get -- and you were somebody who did Warren.
Investors in those that follow your research.
Going into the report yesterday the average analyst that a buyer rating -- over a 700 dollar price target.
You -- did send up a red flag in warned investors in fact.
I you lowered your forecast from the company going into this what flag view.
Well -- who have been working -- cases of high end market saturation for a couple quarters now.
And what happened was we continue to see evidence pile up that that was the case.
And when you combine that which means you can have lower unit volume -- -- what we saw Alice.
Declining gross profit per unit apple.
You find it becomes extremely difficult to grow.
So we looked at all the evidence that we can collect and we we just couldn't we couldn't justify an outperform rating and and fortunately for us from clients that turned out to be accurate -- -- today.
An -- a look at the overall strategy that apple haven't they used to have these breakthrough products that -- cheap.
All these products that came out fitted bed where Steve Jobs introduced the -- they were very expensive product.
Now they seem to be competing on price trying to get in there with a cheaper phone with a cheaper iPad that still was was was -- wrong -- appear to be price for.
Is that a mistake strategically for apple to be trying.
Rather than coming out -- these breakthrough products -- might have of premium on price trying to trying to compete on a price level at the bottom.
Yeah it has two components that question one is that the question of whether there's a breakthrough product that can make a difference anymore and and part of that is because iPhone has just become so massively successful it's hard to move the needle if if if you're not driving higher iPhone units.
The other part is you know they haven't really introduced to -- life on the -- -- on wholesale basis is about form fifty bucks that's still pretty expensive for -- phone.
On the -- side.
The reality is is there was a market for seven inch phones and -- seven inch tablets eight inch tablets that they didn't go there there gonna lose out on the market segments it was a move I think they had to make.
But let's spend this board that if you're able to to warn investors before this dismal report.
Where do you stand now -- kind of jokingly said yesterday what's -- gonna -- now make up many many iPad mean.
Really what is Tim Cook have up its sleeve where do you stand on the stock right now.
Yeah all -- -- nobody knows what they have but there's slayer and our position is that Saddam it's becoming more and more difficult to grow gross profit -- through hardware alone.
And they need to find more revenue opportunities through software and services.
The problem with that is hardware is so massive for -- it outweighs the software and services profits by about twenty to one so.
You know lot of growth there before you can offset any -- some hardware side.
We've got to leave it there and -- price target right now.
While we don't have price targets on sector -- stocks you see fair value -- a year and a four point to five point RA thank you ADR -- Pacific Crest Securities senior research analyst.
Jaded -- hope you're up early tomorrow morning.
