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Apple: Citi Launches With Buy Rating; Sees 'Near-Term Trough'

This article is more than 10 years old.

Citigroup analyst Glen Yeung this morning picked up coverage of Apple shares with a Buy rating and $675 target price, asserting that the stock is at a "near-term trough."

Yeung notes that the stock dropped 28% since peaking on September 21; after a recent rebound, the stock is now down 19% from the peak. He contends the drop is consistent with past corrections in its own history and that of its peers. With year-over-year growth expected to stabilized in the 2013 first half, he writes Apple shares are set to appreciate from here.

"Our analysis shows that Apple shares have corrected consistent with the average correction in its own history, with companies that have achieved 4% of the S&P500, and with companies that have shown similar deceleration," he writes. "Historically, such corrections are followed by 20%-50% appreciation in the following 12 months. While a correction to below the average leaves risk, an adverse change in macro is required to take shares to these levels. While possible, we err on the side of optimism."

That said, he notes that the risks for Apple recently have become clearer. "We assert that Apple’s share of the smartphone market is at risk from low-end smartphones and competition from other eco-systems," he writes. "We see upside from tablets, but this negatively impacts [gross margin]. Meanwhile, we see other risks to [gross margin] that lead us to model margins below consensus. In light of this, we see caps to Apple’s P/E multiple (reflected in our [price target]), likely promoting a more trading bias for the shares."

As noted earlier, UBS this morning repeated its Buy rating on the shares.

AAPL in early trading is up $1.19, or 0.2%, to $572.74.