Analysts at Barclays PLC (LON:BARC) (NYSE:BCS) say they believe that shares of Apple Inc. (NASDAQ:AAPL) are undervalued and thus, worth purchasing now, because they expect the company will be one of the few tech companies in the large cap category to either meet, or even beat their expectations for the fourth quarter.
They do note that the stock seems to be going through one of its most controversial times in the last decade. Many investors and analysts alike have suddenly become very pessimistic about Apple, even though it continues to be the world’s largest and most popular stock. Apple Inc. (NASDAQ:AAPL) shares have dropped more than 20 percent since Sept. 21, although the NASDAQ itself has only lost 9 percent.
In a report to investors this morning, Barclays PLC (LON:BARC) (NYSE:BCS) analysts examine eight major concerns of investors when it comes to shares of Apple Inc. (NASDAQ:AAPL). One issue is the stock seems to have simply lost momentum after two back-to-back sub-consensus EPS reports, followed by a fourth quarter guidance that’s also far below the consensus. But that loss of momentum isn’t the only problem facing the tech giant’s stock.
Here are the eight concerns Barclays analysts believe could be plaguing shares of Apple right now:
1. Concerns over the long term profit margin – As already mentioned, the company’s third quarter guidance indicates 36 percent gross margins, which investors believe could create structural problems. However Barclays experts believe that margins will bottom out in the fourth quarter before expanding.
2. iPhone competition – Android phones are rapidly meeting and sometimes exceeding the quality of the iPhone while undercutting the cost. Barclays PLC (LON:BARC) (NYSE:BCS) experts believe Apple might need to expand its iPhone offerings in the future and that the company will regain its market share in 2013.
3. iPad competition – Samsung Electronics Co., Ltd. (LON:BC94), Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) are now all offering lower priced tablets right now, although Barclays expects Apple’s market share to rebound in 2013 with the iPad Mini.
4. No new innovations on the horizon – This concern goes back to what Jeff Gundlach said earlier this month about his worry over the death of Steve Jobs, who has traditionally been known as Apple’s chief innovator. However, Barclays believes Apple will complete work on the TV service that’s been rumored for a while and also a payment system so that the company can expand the appeal of its iOS.
5. Concerns about Apple’s mapping app – Both Apple Inc. (NASDAQ:AAPL) users and investors alike have been concerned about Apple’s mapping app. They believe it indicates that the company’s desire for quality has gone down, so smartphone users could start turning to Android phones Barclays PLC (LON:BARC) (NYSE:BCS) analysts agree that Apple needs to do something about its mapping app and design a new one for iOS 6.
6. Major changes in management – Instability at the tech giant seems obvious with recent changes that have gone on there, although Barclays does not expect these changes to have much effect on the company as a whole.
7. Product shortages – Production problems have created a shortage of Apple products, although Barclays experts believe the company will correct these problems by January.
8. Changes in supply chain – Apple Inc. (NASDAQ:AAPL) executives have decided to move their production for the company’s chipsets in-house, instead of continuing to rely on Samsung for them. Barclays PLC (LON:BARC) (NYSE:BCS) expects that if this transition can be done smoothly, it won’t have an effect on the company.
This morning, Barclays PLC (LON:BARC) (NYSE:BCS) is keeping its rating for Apple stock as overweight. The industry continues to view the company as neutral, and the price target for shares of Apple Inc. (NASDAQ:AAPL) remains at $800.
