Apple outlook lowered on fear it cannot ‘innovate’ and ‘disrupt’ at pace set by Steve Jobs

Zach Epstein

Apple iPhone Sales Analysis

Apple (AAPL) is expected to sit atop the consumer electronics industry for quite some time to come, but the company’s stock continues to take a beating as growth inevitably slows and margins are squeezed. The latest ding to Apple shares came as Needam & Co. analyst Charlie Wolf lowered his price target from $750 to $710, citing a slowdown in iPhone sales growth and a crunch on iPad margins in the coming 12 months.

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In explaining the logic behind his cut, Wolf writes that “the value of the iPad fell $11.83 or 10.8% to $98.11 chiefly because of the introduction of the iPad mini, which has a much lower gross margin that the full-sized iPad.” Where smartphones are concerned, Wolf believes Apple’s smartphones will have a less substantial impact on Apple shares than previously expected.

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“The value of the iPhone fell $14.56 or 4.5% to $308.64 because of our assumption that the iPhone’s worldwide share would stabilize at 20% rather than 22% as before,” the analyst wrote in a note to clients picked up by Fortune.

“The lingering risk in the Apple story is that the company may no longer innovate at the same pace and with the same disruption that characterized the era when Steve Jobs was at the helm,” Wolf wrote. “With respect to our valuation model, any deterioration in the iPhone’s market share or gross margin would have an outsized impact on our price target.”

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