Like Microsoft, Kass added, Apple will be soon seen a “large cash flow generator with limited secular earnings growth,” and predicted that its stock will languish between $425 and $500 for “as long as the eye can see.”
Following the earnings report, several analysts also lowered their price targets on Apple and cut their expectations to apparently more reasonable levels. According to Mizuho Securities’ Abhey Lamba, the years of Apple blasting past the normal were over. Instead, it was headed to a position of predictable earnings and a steady dividend. “This is a big shift in the company’s position from a year ago,” Lamba told Bloomberg. “The growth has slowed down much faster than we anticipated.”
The problems being faced by Apple include a saturated high-end smartphone market, narrowing profit margins, and manufacturing issues.
According to Kass, Apple is not shying away from signaling this change in trend on its own. The company has announced a new format for sharing its financial outlook, whereby it would offer a range that could be relied upon and not an ultra-conservative number that is largely ignored by investors and analysts. Sanford Bernstein’s Toni Sacconaghi agrees with Kass. “I think they [Apple management] were trying to deliberately say ‘we mean it this time,’” the analyst told The Wall Street Journal…