UPDATE: Apple (AAPL) Margins Remain Strong; BMO Capital Raises to Outperform
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BMO Capital upgraded Apple (NASDAQ: AAPL) from Market Perform to Outperform with a price target of $480.00 (unchanged). Analyst Keith Bachman is comfortable with his $480 price target and thinks the stock will move higher.
Commenting on Apple's Q3 earnings report, Bachman said, "The most important metric for us was that consolidated gross margins were guided to 36%-37%, even with new products being introduced in the September quarter. While we still have some concerns about December-quarter margins, we believe that the September-quarter gross margin guidance plausibly supports our view that the new mid-range iPhone will be in the ~$450 price range with approximately 38% to 40% gross margins."
Bachman is positive on Apple's rumored iWatch, but he is uncertain about iPhones with larger screens, which may cannibalize the iPad mini.
Sentiment in Apple is very negative, noted the report, and many investors have little or no exposure to the stock. With this in mind, the stock likely has more upside potential than previously estimated.
"We do have remaining concerns about Apple's ability to retain 65% of handset industry profits with 9% handset unit share. Ultimately, we believe that profits will be more evenly distributed, as has been the case when industries mature and growth slows. However, we are less bearish on the pace of the decline," concluded the analyst.
For an analyst ratings summary and ratings history on Apple (NASDAQ: AAPL) click here. For more ratings news on Apple click here.
Shares of Apple closed at $418.99 yesterday, with a 52 week range of $385.10-$705.07.