Nomura cuts target on Apple to $530 from $660; blames Apple iPhone margins

Tuesday morning, Stuart Jeffrey, an analyst with Japanese brokerage house Nomura, reiterated his neutral rating target for the stock while lowering his target price to $530 from $660. The analyst's concern is that Apple iPhone gross margins have peaked at the current 55% and could drop to 40% which is the historical peak for mobile handset manufacturers. Jeffrey sliced his earnings forecast for Apple to $45.54 a share in fiscal year 2013, down from his older estimate of $51.68 a share. For the 2014 fiscal year, the analyst sees Apple scoring a profit of $49.69 a share, down from his original estimate of $55.58 a share. Jeffrey sees Apple reporting a down year in 2015 with profits of  $48.99 a share, down from an earlier $54.90 a share forecast and off from 2014's expectations.

The analyst says there isn't much Apple can do to turn things around in the short term and that even the introduction of an Apple iPhone 5S and a Apple iPad mini with a Retina display would not add much to demand. He does add that the downside risks are limited by Apple's low P/E ratio, or the possibility of a dividend increase. Some factors that could potentially boost the stock like a new Apple iPhone release or a refresh of iOS, won't happen until the second half of the year. The release of a low-priced Apple iPhone would only serve to lower margins which would be a negative for the stock. Jeffrey calls the release of OS7 critical but added that management changes at the company might limit any new features of the OS build.


Apple is currently trading at $490, down $10 on the day.

source: Forbes