Apple growth slowdown fuels concern of shift to value stock

Apple Inc., after years of hyper growth that made it the world’s most valuable company, is starting to look more like a value stock, according to some analysts reacting to the iPhone maker’s financial results.

At least 20 analysts lowered their price targets after Apple on Jan. 23 reported its slowest growth rates in years and said the trend will continue. The stock fell 12 percent yesterday, and has dropped more than 35 percent since September.

Apple had defied Wall Street projections for years, ignited by the popularity of the iPod, iPhone and iPad tablet. Now, the company is entering a phase where it may more closely resemble a value stock, said Abhey Lamba, an analyst at Mizuho Securities USA -- looking more like AT&T Inc. and International Business Machines Corp. in offering investors slower sales growth, predictable earnings and a steady dividend.

“This is a big shift in the company’s position from a year ago,” Lamba said. “The growth has slowed down much faster than we anticipated.”

Avi Silver, an analyst at Credit Agricole Securities USA Inc., and Mark Moskowitz, an analyst at JPMorgan Chase & Co., joined Lamba in saying Cupertino, California-based Apple may attract value investors after this week’s earnings report.

Apple increased less than 1 percent to $451.13 at 9:32 a.m. in New York. Rival Samsung Electronics Co. fell 2.5 percent in Seoul after saying a strengthening won may cut operating profit and as investors cited concerns that competition is intensifying.

Rising Challenges

The fiscal first-quarter results underscored the challenges investors see for Apple. Competition is stiffening from Samsung, Google Inc. and Inc. The iPhone, Apple’s biggest source of revenue and profit, is in a smartphone market that is becoming increasingly saturated, while popular new devices such as the iPad mini have a narrower profit margin than other Apple products. Meanwhile, manufacturing snags have held up shipments of the iPhone, iPad and Mac personal computers.

The company also is operating under a new management structure installed by Chief Executive Officer Tim Cook in October, when he ousted longtime mobile software head Scott Forstall.

Last year, Cook reinstated the company’s dividend, offering a payout for the first time since 1995. Apple’s indicated dividend yield has climbed to 2.35 percent as the stock has fallen, according to data compiled by Bloomberg. That compares with 1.66 percent for IBM and 5.33 percent for AT&T.

Page 1 of 2 >>

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome