Apple Recap: Surprising Price Target Cuts, Shifting Priorities, Happy at Home

Here’s a look at everything important swirling around Apple’s world:

Tuesday

Apple (NASDAQ:AAPL) shares recouped early losses on Tuesday, rising just under 1 percent on the day to close at $504.77, in anticipation of its earnings release after hours on Wednesday. Reports from analysts were slightly conflicting on the day, so here is a cheat sheet to the top stories related to the company:

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Happy at Home

Apple may have gotten a string of bad news about its products recently, but according to a new survey, its iOS platform continues to be the market leader in the U.S. and is stealing users away from rivals Google (NASDAQ:GOOG) and Research In Motion (NASDAQ:RIMM). According to Kantar Worldpanel ComTech data, Apple’s iOS accounted for 51.2 percent of all U.S. smartphone sales for the 12-week period ending December 23, 2012. This represented a growth of more than 7 percent from the 44.9 percent over the same period in 2011. Meanwhile, Android’s share fell from 44.8 percent in 2011 to 44.2 percent, while RIM suffered an even bigger decline — falling from 6.1 percent of smartphone sales to 1.1 percent.

According to the research firm, Apple’s strategy of annual iPhone upgrades alongside price cuts for its previous-generation versions contribute to its growth and help it extend its reach to low-tier markets. (Read more)

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iPhones Get Cheaper?

A survey that found customers were increasingly shifting to cheaper iPhones with less memory has prompted UBS analyst Steve Milunovich to cut his price target on Apple’s stock from $700 to $650. Milunovich maintained his Buy rating on the company, but also trimmed his sales estimates for both the current fiscal year and the next. The Consumer Intelligence Research Partners survey found that average demand for storage had fallen from around 30GB with the iPhone 4S to 20GB with the iPhone 5. Also, fewer customers were opting for the 64GB models of the newer phone and demand for older models grew from 33 percent in the 4S product cycle to 50 percent in the iPhone 5 cycle. (Read more)

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Shifting Priorities

Apple needed to start focusing less on hardware sales and more on the potential revenue from its services, according to Barclays Capital analyst Ben Reitzes, who reiterated an Overweight rating and a $740 price target on the stock in a research note on Tuesday. According to the analyst, new services could lead to a two-point recovery — equating to about a $100 move — in Apple’s multiple points rather quickly. Reitzes even provided an example from Google’s software value to prove the importance of having a strong ecosystem, citing the maps debacle. The analyst expected to see the “seeds of this innovation” in March, when, according to him, Apple will preview iOS 7 at an iPad launch event. (Read more)

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Thursday

Apple (NASDAQ:AAPL) fell a massive 12.35 percent to $450.50 on Thursday for its worst single day since September 29, 2008, when it plunged 17.9 percent after the U.S. House of Representatives initially rejected the $700 billion TARP bailout. The selloff was clearly sparked by the fiscal furst-quarter’s earnings report released Wednesday after close of trading. Here’s a cheat sheet to the reviews that followed on Thursday and other key developments related to the company:

Big Bull Eases Off

Brian White of Topeka Capital Markets announced in a note to investors on Thursday that he was cutting his 12-month price target on Apple from a remarkably high $1,111 to $888 per share on the tumbling stock price. “Given the decline in the share price, we are lowering our 12-month price target to $888 from $1,111 for Buy-rated Apple,” White wrote. He added that Apple’s immediate decline had left the stock trading “at less than six-times (ex-cash) our calendar year 2014 EPS estimate and we believe there is quite a bit of bad news priced into the stock at current levels, while estimate resets lower the bar for the future.”

The analyst also cut his earnings estimates for the March quarter and for the full fiscal year. However, he added, profit and sales cycle were likely to reach their bottoms in the second-quarter of fiscal 2013… (Read more)

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Biggest PT Cut

Jefferies analyst Peter Misek was one of multiple analysts who came down harsh on Apple post earnings. He cut his rating on the stock from Buy to Hold and chopping his price target by as much as $300. “[The] slowdown in iPhone sales is real and material,” Misek wrote in a note to investors. “While management was somewhat evasive on the call, it appears that demand in the second half of the quarter and into [first calendar quarter] was much weaker than management or we expected.”

Misek added that Apple was losing the smartphone screen-size war and that the company’s high margins would now stay below 39 percent and trend lower because of growth concentration in the lower ends of the smartphone and tablet markets and shorter product cycles from rivals… (Read more)

Market Value Drop

With Apple’s stock plunging, there was another key figure that was rapidly losing value: its market cap. A year ago, on January 25, 2012, Apple’s stock-market value grew to $416.5 billion, beating out Exxon Mobil (NYSE:XOM) as the most valuable company in the world. However, with the stock consistently dropping in value since reaching those highs in September, the company’s market cap has been in danger of slipping down on the list as well. With the latest fall, at one point on Thursday, the gap between Apple and Exxon was down to only about $6.2 billion. Interestingly, Apple’s effective market cap is now just over three times the size of its cash reserves, which are worth $137 billion. That would imply that Apple’s other assets, including operations and brand are worth about $300 billion… (Read more)

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Friday

Apple’s (NASDAQ:AAPL) stock dropped 2.36 percent on Friday to close at $439.85, a whole 12.03 percent below the level it was at when the week began. In a dramatic week, the middle of which saw the release of the company’s fiscal first-quarter earnings report, Apple’s status changed from Wall Street’s darling to stock of mystery. Here is a cheat sheet to the key stories that moved with the stock on Friday:

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Apple is Bested

Apple lost its status as the largest U.S. publicly traded company by market value during the trading day on Friday to Exxon Mobil (NYSE:XOM) as its shares continued to fall. With Apple falling 2.36 percent on the day to $439.88, its market value stood at roughly $413 billion. Exxon, with its shares largely flat on the day at $91.73, had a market value above $418 billion. Apple had beaten Exxon to the title exactly a year ago, on January 25, 2012. However, since reaching a record-high price in September, its shares have slipped more than 35 percent. It is still the most valuable tech company, with both Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT) possessing a value of around $250 billion each… (Read more)

Korean Dominance

Samsung (SSNLF.PK) and Apple continue to dominate a growing global smartphone market, although the iPhone maker is losing some ground to its Korean rival. According to research firm IDC, Samsung’s market share in the quarter ending in December rose to 29 percent from 22.5 percent a year earlier, while Apple’s share dropped slightly to 21.8 percent from 23 percent. Samsung shipped 63.7 million devices to Apple’s 47.8 million and saw a 76 percent year-over-year growth to the iPhone maker’s 29 percent. The Korean company is going strong on the back of its ultra popular Galaxy line of based smartphones and mid-range devices. Meanwhile, Huawei’s share rose to 4.9 percent from 3.5 percent and took it to the third spot… (Read more)

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Labor Issues Fixed

Apple said it cut off Guangdong Real Faith Pingzhou Electronics as a component supplier last year after discovering as many as 74 underage labor violations at the circuit board manufacturer’s factories. Apple also discovered and reported an employment agency that was forging documents to allow people younger than 16 to work illegally at the supplier. The announcement was made through Apple’s latest Supplier Responsibility Report, which provides updates on worker protections and factory conditions at its many manufacturing partners. Apple has lately faced much criticism for its partners’ alleged flouting of basic labor rules, including poor wages and cramped living conditions for workers. The spotlight has been fixed even more firmly on Apple since 2010, after reports of suicides at its main manufacturer, Foxconn… (Read more)

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