Here’s why Toni Sacconaghi says ‘Apple’s best days are behind it’

From Wednesday’s New York Times:

“There’s no question that Apple’s best days are behind it,” said Toni Sacconaghi, an analyst at the Bernstein brokerage firm. “The company grew at astronomical rates, and it’s now so big that its ability to grow at those rates doesn’t exist anymore.”

That’s a strong quote, placed high up (6th graph) in the story. “Best days behind it” captured succinctly the sentiment on Wall Street that knocked $40 billion off Apple’s market cap Wednesday.

It’s also a famous quote, one first attributed to Sacconaghi on Oct. 27, 2015, and used over the next few days to spice up dozens of Apple stories, including the Macalope’s ironic Can’t win for winning: Apple doom coming any day.

Out of respect for Sacconaghi, whom I think of as one of Wall Street’s smartest sell-side analysts, I dug out the source of the soundbite, a CNBC interview given just hours before Apple released its fiscal Q4 2015 results.

It’s a good interview, maybe even an important one, well worth an investment of four minutes if you like this kind of thing. The quote, it turns out, originated with the host, who fed it to his guest. But Sacconaghi rose to it like a trout to a fly. He’d already said worse, describing Apple as entering “growth purgatory.”

Here’s the thing. He’s talking about Apple the stock, not Apple the company. He was asked “Why hasn’t this stock performed better?” and he was trying to get viewers to see it from the buy side’s perspective.

Sacconaghi’s own view is that the stock is undervalued. From Tuesday’s note to clients:

“We continue to believe that AAPL is an inexpensive stock, and that the iPhone will grow in FY 17. Moreover, we note that AAPL has traditionally outperformed going into a new phone cycle and accordingly rate the stock Outperform, with a $135 price target.”

From CNBC Oct. 27, 2015:

10 Comments

  1. David Drinkwater said:

    Run that broken clock, Toni. Run that broken clock.

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    April 28, 2016
  2. John Kirk said:

    “There’s no question that Apple’s best days are behind it,”

    I think, at the very least, there is a “question” as to whether Apple’s best days are behind it. And while better days are not guaranteed to Apple (or any other company), their history should give them the benefit of the doubt. Instead, pundits use Apple’s history against them like a club.

    Apple’s present is assured for quite some time. Will they invent the “next iPhone”? I don’t know. But I don’t see anything remotely challenging the iPhone today. And I don’t see any “next iPhone” in sight. Do you? It seems to me that we’re in the pre-iPhone, the pre-iPod, the pre-Model-T stage. Lots of innovators trying lots of things, but the definitive future products have not yet emerged.

    Why Apple is hammered for not creating the “next iPhone” and every other company in the World gets a pass, I don’t know. But I know it’s so.

    0
    April 28, 2016
  3. Kirk Burgess said:

    Joseph’s point about the 2 year cycle is correct and an extremely underreported factor when it comes to Apples financial performance.

    0
    April 28, 2016

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