Apple’s Stock Drops

30 09 2008

Apple’s shares fell 17.5 percent in early trading Monday, as two noted brokerage firms scaled back their recommendations to a “hold” from a “buy.”

Apple fell as low as $105.77 a share in intraday trading, down substantially from its close of $128.24 on Friday. Apple’s shares sold off sharply after Morgan Stanley and RBC Capital Markets downgraded the stock.

Morgan Stanley not only revised its recommendation for the stock, but also lowered its fiscal 2009 earnings estimate to $5.47 a share from $5.91 a share.

In listing its reasons for its revisions, Morgan Stanley said in a research note:

First, PC unit growth is decelerating and the remaining source of growth is increasingly in the sub-$1,000 market where Apple does not play. Second, even in the best of scenarios, Apple’s earnings per share growth will decelerate meaningfully from June quarter levels. A combination of tough compares (with the previous years figures) and investments in iPhone growth drive our December quarter earnings per share to a decline of 8 percent year over year, down from +29 percent growth June.

Morgan added that it expects Apple to offer a more conservative guide to Wall Street and investors for the three-month period ending in December.

RBC Capital, meanwhile, downgraded Apple’s stock based on “elevated risks” from a slowdown in consumer spending.

According to RBC’s research note:

In a worsening consumer spending environment we are downgrading from outperform to sector perform on: 1) reduced visibility growth, margins. 2) elevated risks to valuation.

RBC noted in its report that its September data showed the number of those intending to purchase a Mac laptop within the next 90 days has dropped to 29 percent, compared with 34 percent in August, and those expecting to purchase a Mac desktop fell to 26 percent from 30 percent in the same period.

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Apple’s Stock Drops

30 09 2008

Apple’s shares fell 17.5 percent in early trading Monday, as two noted brokerage firms scaled back their recommendations to a “hold” from a “buy.”

Apple fell as low as $105.77 a share in intraday trading, down substantially from its close of $128.24 on Friday. Apple’s shares sold off sharply after Morgan Stanley and RBC Capital Markets downgraded the stock.

Morgan Stanley not only revised its recommendation for the stock, but also lowered its fiscal 2009 earnings estimate to $5.47 a share from $5.91 a share.

In listing its reasons for its revisions, Morgan Stanley said in a research note:

First, PC unit growth is decelerating and the remaining source of growth is increasingly in the sub-$1,000 market where Apple does not play. Second, even in the best of scenarios, Apple’s earnings per share growth will decelerate meaningfully from June quarter levels. A combination of tough compares (with the previous years figures) and investments in iPhone growth drive our December quarter earnings per share to a decline of 8 percent year over year, down from +29 percent growth June.

Morgan added that it expects Apple to offer a more conservative guide to Wall Street and investors for the three-month period ending in December.

RBC Capital, meanwhile, downgraded Apple’s stock based on “elevated risks” from a slowdown in consumer spending.

According to RBC’s research note:

In a worsening consumer spending environment we are downgrading from outperform to sector perform on: 1) reduced visibility growth, margins. 2) elevated risks to valuation.

RBC noted in its report that its September data showed the number of those intending to purchase a Mac laptop within the next 90 days has dropped to 29 percent, compared with 34 percent in August, and those expecting to purchase a Mac desktop fell to 26 percent from 30 percent in the same period.





Oil Prices Fall

30 09 2008

Oil prices dropped sharply on Monday as the House voted down a $700 billion bailout plan for the financial markets, raising the specter of slower economic growth and depressed demand for petroleum products. The House leadership, however, plans a second attempt to pass the bill.

Crude oil futures fell $10.68 to close at $96.21 a barrel on the New York Mercantile Exchange. They have lost nearly $25 since last Monday, and dropped sharply as the House voting began.

In the last two weeks, commodity markets have been shaken by the turmoil on Wall Street while still recovering from the impact of two powerful hurricanes in the Gulf of Mexico. After reaching $145.29 a barrel in July, prices had slumped to nearly $90 a barrel earlier this month as the nation’s economic prospects dimmed. But in a wild market, they spiked back up last week on the back of tremendous uncertainty in the financial markets.

Anxiety once again gripped investors on Monday after Congressional leaders failed to garner enough votes to pass a compromise bailout agreement that was reached over the weekend. The plan, the biggest bailout in history, would have allowed the Treasury Department to buy back troubled assets held by banks and other financial institutions. It is unclear when the House can reschedule a vote, or whether it will pass this time.

Before the vote, investors were also reminded that the financial crisis was far from over. In the latest episode of the unfolding meltdown, Citigroup will buy the banking operations of the Wachovia Corporation, the government said Monday. Meanwhile, the Belgian, Dutch and Luxembourg governments partially nationalized the European financial conglomerate Fortis, another sign that the crisis that began because of sour home mortgages in the United States could be spreading.

Analysts at Barclays Capital said the frantic weekend negotiations that led to the bailout agreement “appear to have failed to revive market sentiment.” As the economic situation deteriorates, the demand for commodities, including oil, is expected to slow.

“The outlook for global equity, interest rate and exchange rate markets has become increasingly uncertain,” analysts at Deutsche Bank wrote in a note to investors. “We believe commodities will be unable to escape the contagion. From a commodity perspective our most pressing concern is to what extent the U.S. virus spreads globally and specifically to China.”

The bank’s analysts pared their expectations for next year as oil consumption drops because of slowing economic growth, reducing their oil and gas price forecasts by about 20 percent for 2009.

Concerns that the crisis might be spreading to Europe helped push down the value of the European common currency. The euro dropped against the dollar to $1.43 on Monday from $1.46 on Friday.

The weaker economic outlook could further push down oil prices in the coming months if demand for oil in developed countries keeps falling, according to Ben Dell, an analyst at Bernstein Research. He expects oil consumption could fall by 1.3 million barrels a day, or 2.6 percent, in the fourth quarter this year. That is much more than the 470,000 barrels a day drop forecast from the International Energy Agency.





AIG Seeks Federal Aid

14 09 2008

The American International Group is seeking a $40 billion bridge loan from the Federal Reserve, as it faces a potential downgrade from credit ratings agencies that could spell its doom, a person briefed on the matter said Sunday night.

Ratings agencies threatened to downgrade the insurance giant’s credit rating by Monday morning, allowing counterparties to withdrew capital from their contracts with the company. One person close to the firm said that if such an event occurred, A.I.G. may survive for only 48 hours to 72 hours.

A.I.G.’s sickly financial health emerged late into one of the most tumultuous days in Wall Street history. Lehman Brothers, the 158-year-old investment bank, is expected to file for bankruptcy protection Sunday night, while Bank of America has agreed to buy Merrill Lynch for $50.03 billion.

Though this past weekend was convened to focus on Lehman, the Wall Street chieftains who gathered at the Federal Reserve Bank of New York also pondered a solution for A.I.G. The firm had become one of the biggest underwriters of complex debt securities known credit default swaps, used as insurance for a wide range of products, including the mortgage instruments that have been the bane of Wall Street for the past year and a half.

Eric Dinallo, the New York state insurance superintendent, has been deeply involved in discussions about A.I.G.’s survival, this person said.

The firm had planned to move $20 billion from its regulated insurance business to its holding company and to sell assets and a stake in the company to private equity firms. But A.I.G. has ruled out the capital shift because of the time and complexity involved.

J. C. Flowers & Company, a buyout firm focused on financial services firms, offered $8 billion for a stake in the business that would have given it an option to buy all of A.I.G. down the road.

Kohlberg Kravis Roberts and TPG also said they would bid, but withdrew at the last minute, citing anxiousness over the company’s precarious financial health.

A.I.G.’s extraordinary move of reaching out to the Fed for help may spur other non-investment banks to try a similar move. Companies ranging from General Electric to GMAC have been hurting badly and would desperately love the liquidity that the Fed would provide.

Yet it isn’t clear whether the Fed would acquiesce to A.I.G.’s request.

The firm had earlier been reported to be interested in selling its aircraft leasing business. But people briefed on the matter said that unit bore special tax advantages that A.I.G. had decided would be lost on any other owner.