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Apple analyst reduces AAPL targets on cheap iPhone margin concerns
- — 13 January, 2013 19:48
Even the most bullish of Apple analysts are getting nervous about the companies share price.
Piper Jaffray's Gene Munster has cut his target for AAPL down from $900 to $875. Munster has previously claimed that Apple could reach $1,000.
However, the analyst still rates the stock as Overweight, suggesting that he expects it to outperform the rest of the market.
Speaking on CNBC, Munster said: "What's going on is we're being more conservative. We're factoring more the negative potential outcomes in the next year and two years, and not factoring as much as the positive potentials."
One reason for his concern is the rumour that Apple will sell a cheaper iPhone. Munster believes that a less expensive iPhone will reduce Apple's margins. During the interview on Fast Money, Munster explained that he was factoring in lower margins on a potential sub-$400 phone from Apple, while also excluding the potential acceleration from any increase in market share in the price segment.
Despite this, Munster believes that a cheaper iPhone is still the "right move" for Apple. He notes that the company is missing out on 65% of the smartphone market at the moment.
In a note to investtors Munster has suggested that a low-cost iPhone could generate $6.5 billion in revenue for Apple.
Munster expects this phone to feature a lower-quality screen and casing, and a downgraded processor. He thinks Apple will charge $200 for the device (£123), reports Tom's Hardware.
Munster was one of the last true believers and it looks like even he's wavering now, writes Business Insider.
One other bullish Apple analyst, Brian White at Topeka Capital, still has a $1,111 price target on AAPL.
Back in April 2012, Munster joined White in predicting that Apple's share price would increase to $1,001 with the next 12 months thanks, in particular, to it's move into the Chinese market.
Back in April, Munster wrote that: "Shares can reach $1,000 based on our belief Apple will continue to win in global mobile devices." At the time Munster still maintained his shorter-term, formal target of $910.
Earlier in April 2012, Topeka Capital Markets analyst Brian White predicted that thanks to massive growth in China, the Apple Television and the next iPhone, Apple's stock price would rise to the heady heights of $1,001 per share within 12 months.
The news follows reports that Apple's Phil Schiller has denied rumours that Apple will ship a cheaper iPhone. Despite this, Munster still believes that there is a 60 to 70 percent chance that Apple will launch a budget iPhone this year.