AAPL

Apple Inc. (NASDAQ:AAPL) seems to be losing its value proposition in terms of stock price, but maintains a bullish recommendation from analysts. The company received its fifth setback from analyst after Bank of America Corp (NYSE:BAC) Merrill Lynch (BAML) analysts joined a bandwagon of analysts lowering the company’s price target over the last 48 hours. Nevertheless, the company still maintains its Buy rating, or equivalent among the analysts, which indicates that, despite the recent cut-down in the valuation of the company’s stock, it is still undervalued according to the current market price. BAML reduced  Apple PT from $780 to $720 per share.

BAML apple model

The recent cuts on price targets/price objectives, as is the case of BAML, comes at the back-end of massive iPhone 5 preorders in China following the launch of the device in the country. The company logged 2 million iPhone 5 sales units within the first three days. During the early periods of December, analyst had predicted a better performance from the iPhone maker towards the end of F1Q13. This is because, iPhone 5 had been rescheduled to sell in China in December as compared to the initial timeline of F2Q13.

Nonetheless, the recent downward revisions of price target seem to override all the optimism expressed since the company announced its plans to launch the device in china earlier than expected. Analysts from Citigroup Inc. (NYSE:C), as well as Mizuho Securities, cut their price targets significantly, albeit maintaining their Buy rating on Apple Inc. (NASDAQ:AAPL). Canaccord Genuity and Pacific Crest analysts also cut their price targets and revised their estimates as earlier featured in our articles.

A majority of the analysts once again point on the iPhone supply bottlenecks suggesting that Apple Inc. (NASDAQ:AAPL) supply chain companies are cutting down iPhone production. Others believe that the rescheduled launch of iPhone 5 in China, the world’s most populated country, is likely to impact negatively on C1Q13 iPhone sales. An obvious assumption is that the company will have to find a way to revamp iPhone sales for Calender year 2013. Indeed a majority of them are lowering their iPhone sales estimates and EPS, as is the case of BAML, which reduced iPhone sales by nine million units.

In a report published Tuesday, BAML analysts wrote, “the iPhone 5 launches are progressing well (2mn+ iPhone 5 units in China in 3 days was solid, vs. 4-6.7mn quarterly units in last 3 quarters). That said, a tepid US/Europe consumer and aggressive promotions at US retailers lead us to trim our C2013 iPhone forecast to 170mn (179mn prior) and EPS (2nd time in C4Q12)”.

The supply chain adjustments are definitely a concern to the analysts. However, the analysts also point that the adjustments are common at this time of the year, and hence no need to panic. In addition, the analysts also believe that the iPhone market share could roll back to 17/18 percent in 2014 following the launch of the iPhone 5 within China Mobile network, China’s biggest telecommunications company by customer base.

In the report, the analysts wrote, “We believe the production cuts mainly are from components in upstream, mostly in-cell panels. Looking beyond the supply chain concerns, we believe the stock offers an attractive balance of growth and value. We assume ~16% iPhone market share in F2013, and China Mobile launch in F2014 (not included in our model) could drive the market share back to ~17-18%”.