DA Davidson Says Buy The Dip In Apple

Apple, Inc. AAPL made headlines this week by announcing it will be building a second headquarters in Austin, Texas. Apple investors are more concerned about the company’s share price heading south, but one Wall Street analyst said Friday Apple’s recent dip is a buying opportunity.

The Analyst

D.A. Davidson analyst Tom Forte reiterated his Buy rating for Apple but lowered his price target from $290 to $280.

The Thesis

The one-two punch of rising iPhone prices and expanding margins will be more than enough to offset slumping iPhone unit sales.

Forte said Apple’s recent sell-off has been overdone. (See Forte's track record here.)

“When considering shares have declined 17.6% since the company reported its September quarter (versus a 2.7% drop in the S&P 500) and management first indicated challenges for iPhone unit sales in emerging markets (Brazil, India, Russia, and Turkey), we believe lower near-term operating performance is already priced into the shares,” he wrote in a note.

Forte said Apple’s second headquarters is a positive public relations development for the company, reinforcing its role in the U.S. economy as a job creator.

Looking ahead, D.A. Davidson lowered Q1 iPhone unit sales growth estimate from +0.5 percent to -3 percent. The firm is also lowered its projection for average sales price growth from +4.0 percent to +2.7 percent.

Forte also lowered his gross margin forecast from 38.3 percent to 38 percent, the low end of Apple’s guidance range of between 38 percent and 38.5 percent. He said potential upside to his estimates would likely come from higher-than-expected ASPs given this years least expensive new iPhone model is priced about 7.5 percent above last year’s low-end model.

Price Action

Apple traded lower by 2.3 percent Friday to $167.01 per share. The sell-off could be attributed to Ming-Chi Kuo of TF International Securities, who cut his iPhone shipments estimates by 20 percent

Related Links:

How The Sell-Side Sentiment On Apple Has Changed Since The Q4 Print

How Google Is Driving Apple Services Revenue Growth