RBC downgrades Apple with $70 price target

Sun, Jan 18, 2009

Analysis, Finance, News

RBC analyst Mike Bramsky downgraded Apple to an “Underperform” rating, and lowered his target price for the company to $70, down from an initial target of $125.

In explaining his decision, Bramsky argued that current economic conditions are affecting the extent of consumer purchases in electronic devices.  He also expressed doubt about Apple’s future given Steve Jobs’ recent announcement that he would be taking a 6 month leave of absence.

Jobs is widely viewed as Apple’s chief innovator, dealmaker, leader, deeply involved in minute decisions, inextricably tied to Apple’s brand. Jobs’ being sidelined for 6 months or more and unavailable day-to-day — with no clear successor — in our view raises risks to Apple’s sustaining its stellar record of innovation going forward.”

While consumer spending is clearly low, Apple has proven to be resilient in fighting through lean economic times relatively unscathed.  And in regards to Apple’s innovation – Apple is and always has been about innovation, with or without Steve Jobs.  Steve Jobs value to Apple cannot be overstated, but keep in mind that  Apple employs thousands of highly capable, talented, and experienced individuals aside from Jobs.  Also, products at Apple are often in the pipeline for 1-2 years before they get released, so there shouldn’t be a slowdown at Apple anytime soon.

While concern about Apple’s financial health is expected, given recent event, investors should keep in mind that Apple’s fundamentals have never been stronger.  A stock target of $70 seems awfully low, and it will be interesting to see how investors respond in the coming months.

Incidentally, Apple is set to announce its earnings on January 21, 2008.


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