Price target cuts across the board, ratings mostly unchanged.
Excerpts from the notes I've seen:
Toni Sacconaghi, Bernstein: Yes, Apple Pre-Announced... Our Key Take-aways and What to Do Now. While no one is likely to be surprised by Apple’s December quarter miss, the magnitude of the fall-off in iPhones (14% in revenue terms) is likely worse than most expected... Apple squarely attributed its shortfall to China but iPhone revenues outside of China still appeared to fall $3B+ short of Apple's expectations... Perhaps in part because there are no easy fixes, Apple failed to acknowledge the possibility that current iPhone prices are simply too high (stunningly, we note that iPhones prices are nearly 5x higher than the average non-Apple smartphone sold globally)... Our analysis suggests that AAPL doesn't work until estimates bottom, and we see some risk to FY Q2 guidance, suggesting that investors may want to wait to build positions. Market Perform. Cut price target to $160 from $210
Rod Hall, Goldman Sachs: Negative Pre-announcement as EM/China demand environment remains weak. Apple’s guidance cut confirms our negative view on demand in China that we have been flagging since late September. Neutral. Cut price target to $140 from $182.
Pierre Ferragu, New Street Research: Apple Upgrade: Our thesis has played out in full and things are as bad as they can be. Rating upgrade to Neutral from Sell. Price target cut to $140 from $165.
Wamsi Mohan, Merrill Lynch: Rare miss but weakness likely to extend beyond Dec qtr. Although the trade tensions with China could ease in 1H19, the broader demand weakness and slower upgrade cycles are likely to push units much lower in F19 (we now model 181mn units down from 210mn previously). Our downgrade late last year was predicated on a weaker China but demand seems to have deteriorated materially over the past two months. Neutral. Cut price target to $195 from $220.
Michael Olson, Piper Jaffray: Dec Qtr Pre-Release Largely Due to China Weakness. China macro weakness was specifically highlighted as a primary reason for the miss, with that weakness being exacerbated by trade tensions with the U.S. and the stronger U.S. Dollar, among other factors. Overweight. Cut price target to $187 from $222.
Jun Zhang, Rosenblatt: More Headwinds Expected in March Quarter. In addition to China weakness, we believe product pricing may be another reason other markets are not seeing much growth. We believe the downside guidance reflects December quarter production cuts, and we expect the March quarter to be much weaker than normal seasonality. Neutral. $165.
Samik Chatterjee, J.P. Morgan: iPhone Volume Woes Continue on Cyclical Headwinds. Although preliminary F1Q19 results were quite disappointing, we see silver linings in: 1) better than expected ~27% y/y growth in Services revenue despite moratorium on app approvals in China; 2) strong growth and all-time high count of active devices in the installed base; 3) strong growth of ~50% y/y in wearables (Watch+ Airpods) demonstrating ability to leverage the large installed base to drive ancillary revenues; 4) strong non-iPhone revenue growth of +19% y/y. Overweight. Cut price target to $228 from $266.
Timothy Arcuri, UBS: CQ4 neg-pre on weak China demand. AAPL will no longer discuss iPhone units, but given our view that shortfall was primarily iPhone XR-related, results imply ~64MM units (vs ~73.5MM guide) and iPhone revenue down ~15% Y/Y – the worst CQ4 for iPhone by far. Buy. Cut price target to $180 from $210.
Daniel Ives, Wedbush: Apple's Darkest Day in the iPhone Era. Staying bullish on the Apple story despite last night’s “black eye” results. It would be easy to throw in the white towel on the Apple story this morning and declare the iPhone growth story is dead in the water after a historic decade+ run that kicked off when Steve Jobs unveiled the iPhone in January 2007. To this point, while last night is a bitter pill to swallow and will pressure shares, we believe going forward this is an installed base story of 750 million active iPhones worldwide with 350 million of those in the current window of an upgrade opportunity over the next 12 to 18 months. Outperform. Cut price target to $200 from $275.
Gene Munster, Loup Ventures: Bridging the Gap Between Perception and Reality. AAPL stock is now at a crossroads. Some investors will consider the stock broken and never reward it with a "proper" multiple, but we've followed the company long enough to know there is cyclicality in the market's relationship with Apple.
Walter Piecyk, BTIG: Cutting Apple Target As iPhones Miss By More Than 12 Million. We estimate iPhone units sales were less than 64 million in the December quarter, an 18% decline from last year. That’s the largest decline in unit sales since the March 2016 quarter following the launch of the iPhone 6S when unit sales declined 16%. We expect iPhone unit sales to drop to 42.5 million in the March quarter, reflecting typical seasonal declines and implying a 19% decline from the prior year. This is clearly an important metric and one that Apple said they would no longer report when they issued guidance 63 days ago. It is not helpful to investors to not report this metric. Cut price target to $197 from $235.
Aaron Rakers, Wells Fargo: A multi-quarter challenge. While weaker-than-expected iPhone results have been widely anticipated since November (we think street expectations were still in the low-70M unit range; we now estimate a mid-60M iPhone ship estimate), our industry checks leave us to believe that demand weakness, coupled with channel inventory burn-off, could persist for a few quarters. Market perform. Cut price target to $160 from $210.
Andrew Uerkwitz, Oppenheimer: Is This the First Crack? We would make the argument design and price may be the biggest issues at play, not macro... We don't think Apple is the only one with growth problems. We believe it's industry wide: higher prices, combined with fewer new features that provide real utility, are the biggest culprit. For Apple, we do worry this leads to margin degradation and a focus on what's the next cycle driver (5G, AR, healthcare?). Perform. No price target.
Gene Munster, Loup Ventures (2): The Healing Process Begins. Tim Cook is at the top of his game. This may sound counterintuitive, given the negative Dec-18 results, but tough quarters will come and the team needs to rise to the occasion. Cook’s commentary on investor expectations, Apple’s talent, and its ability to innovate are spot on—a battle cry for the company and a sign of strong leadership. We don’t want to let them off the hook for bad forecasting, but there are more important things than quarterly forecasts, and Cook has his priorities straight.
Aaron Tilley, The Information: Apple Lowers Revenue Estimate for Important Holiday Season. Apple’s latest phones keep getting more and more expensive, a strategy that is colliding with the reality that consumers have to pay the full cost nowadays.
John Gruber, Daring Fireball: Apple’s Terrible No Good Very Bad Earnings Warning. I called “bullshit” (literally the word I used on my latest podcast) on the last two months of “iPhone sales are slower than Apple expected” stories and clearly I was wrong. I still think most of the reports were bullshit — particularly the ones based on reports from Asian suppliers — just bullshit that happened to turn out right for once, like a stopped watch getting the time right twice a day.
Ben Thompson, Stratechery: From the Archives: Apple’s China Problem. The fundamental issue is this: unlike the rest of the world, in China the most important layer of the smartphone stack is not the phone’s operating system. Rather, it is WeChat.
Neil Cybart, Above Avalon: It's China. There is going to be a debate regarding Apple’s fortunes in China. Everyone seems to be saying “told you so” when it comes to Apple in China, even though very few people were going around saying slowing economic growth would be the item that actually stings Apple in China. Cook’s commentary certainly doesn’t make one think conditions have improved in January. It’s not clear how Apple can turn things around other than there being some kind of U.S. / China trade relations breakthrough.
Kara Swisher, New York Times: Is This the End of the Age of Apple? We need the next wave of innovation, and we need it now.
Guggenheim: Terminated Apple coverage with Robert Cihra's departure.
More as they come in.