Apple results spur price target cuts, shares fall 9 percent

CUPERTINO, Calif., Thu Jan 24, 2013 — Weaker-than-expected holiday sales of Apple Inc.’s iPhone reinforced fears that it is losing its dominance in smartphones, driving its shares down 9 percent in premarket trading and drawing another round of stock price target cuts.

Fourteen brokerages including Barclays Capital, Mizuho Securities USA, Credit Suisse, Deutsche Bank, Raymond James, Robert W. Baird & Co. and Canaccord Genuity cut their price target on the stock by $142 on average to $599.

Apple’s shares closed at $514 Wednesday on the Nasdaq.

Jefferies & Co. cut its rating on Apple’s stock to “hold” from “buy” and slashed its share price target by $300 to $500.

Jefferies analyst Peter Misek, who has previously raised red flags about Apple cutting orders to suppliers, said the iPhone slowdown was “real and material” and here to stay.

“We think Apple is losing the screen-size wars,” Misek said, noting that demand was moving away from the iPhone’s 3.5-inch and 4-inch screens to screens of 5 inches offered by rivals such as Samsung Electronics Co. Ltd, HTC Corp. and Nokia Oyj.

Misek is a top-rated analyst for the accuracy of his earnings estimates for Apple, according to Thomson Reuters StarMine.

Apple said it shipped a record 47.8 million iPhones in the December quarter, but this trailed the average analyst forecast of 50 million units.

Best Buy impresses with market share, profit view

RICHFIELD, Minn. ― Best Buy Co. appeared to gain market share from rivals in the United States during the key holiday season and stood by its profit outlook for the financial year despite a 1.2 percent same-store sales decline in December.

The news boosted Best Buy shares nearly 3 percent and also allayed some concerns that all its holiday sales were driven by profit-sapping discounts.

The world’s largest consumer electronics chain said on Friday that sales at stores open at least 14 months fell 0.4 percent at its U.S. unit, while they slipped 4.3 percent internationally on weakness in Canada and Europe.

“Given competitor comments and supplier input, these are relatively impressive results,” Credit Suisse analyst Gary Balter said, adding that “the reconfirmation of… guidance by management should put to bed the worries of massive margin deterioration to drive those sales.”

While the international same-store sales number missed most analyst expectations, many such as David Strasser at Janney Capital Markets and Anthony Chukumba at BB&T Capital Markets said they were happy with Best Buy’s domestic performance, especially since they believe the chain gained market share in the United States during the key selling season.

“It does appear that Best Buy, at least from a brick-and-mortar perspective, picked up market share in December,” Chukumba said, pointing to weak performance in the consumer electronics sector by Costco Wholesale (COST.O) and Target Corp (TGT.N). Best Buy shares were up 2.9 percent at $24.12 Friday morning on the New York Stock Exchange.

“It is good enough from my perspective,” Chukumba said. “I am just happy they are going to make (profit numbers for) the quarter.”

Unlike the 2010 holiday season when Best Buy held the line on discounts and promoted only pricey goods, this time around it offered deep discounts on items ranging from flat-screen TVs to digital cameras.

McDonald’s quarterly profit, September sales beat expectations

OAK BROOK, Ill. ― McDonald’s Corp. reported a higher-than-expected quarterly profit on Friday, helped by stronger-than-expected sales at established restaurants in September, and its shares rose 3 percent.

McDonald’s has been taking market share from other fast-food chains for months. It has benefited from improving food quality, adding Dollar Menu items and introducing high-margin beverages such as coffee and fruit smoothies to broaden its appeal beyond the young men who account for the biggest share of sales at most other fast-food chains.

The company also is sprucing up restaurants in Europe and the United States, which has helped boost sales.

The world’s biggest fast-food chain said third-quarter net income rose to $1.51 billion, or $1.45 per share, from $1.39 billion, or $1.29 per share, a year earlier.

Analysts on average forecast $1.43 a share, according to Thomson Reuters I/B/E/S.

Earnings per share rose more than 12 percent, but were up only about 6 percent excluding foreign currency benefits.

Revenue rose 13.8 percent to $7.17 billion. Sales at established restaurants were up 5 percent globally, with increases of 4.4 percent in the United States, 4.9 percent in Europe and 3.4 percent in the Asia/Pacific, Middle East and Africa region.

Sales at established restaurants rose 6.6 percent in September, while analysts on average expected a 3.6 percent increase.

U.S. same-restaurant sales rose 5 percent, while Europe was up 6.9 percent and Asia/Pacific, Middle East and Africa had a 6.8 percent increase.

The company forecast a 4 percent to 5 percent increase in sales at established restaurants in October.

McDonald’s shares rose 3 percent to $91.69 in premarket trading.