Has Goldman Sachs lost faith in Apple?

Twelve months ago its target for Apple was $163 a share. Now it’s $124.

How quickly these Apple analysts lose faith.

Simona Jankowski was positively giddy about Apple’s prospects when she took over Bill Shope’s old seat at Goldman Sachs last fall. Buying the Apple-as-service theme, she stuck to Shope’s 12-month price target of $163 a share and did him one better, putting Apple on Goldman’s coveted “Conviction Buy” list.

By mid-January her faith had been shaken somewhat by iPhone supply chain rumors. Jankowski still saw Apple as a “compelling” buy, but anticipating weak Q2 guidance from Tim Cook, she lowered her price target from $163 to $155.

I must have missed a trick, because when she cut her price target to $124 on Wednesday—citing slowing worldwide smartphone sales—it was from a previous target of $135. For reasons unexplained, neither price appeared in the disclosure section of Wednesday’s note. (See below.)

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Click to enlarge.

For Goldman Sachs to draw back from Apple is a big deal, given how deep its tentacles reach into the company’s finances. Not only is it a major shareholder (long $5 billion worth as of March 31), but it has a hand in nearly every deal Apple does.

From that same disclosure section:

  • Goldman Sachs has received compensation for investment banking services in the past 12 months: Apple Inc.
  • Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Apple Inc.
  • Goldman Sachs had an investment banking services client relationship during the past 12 months with: Apple Inc.
  • Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: Apple Inc.
  • Goldman Sachs had a non-securities services client relationship during the past 12 months with: Apple Inc.
  • Goldman Sachs has managed or co-managed a public or Rule 144A offering in the past 12 months: Apple Inc.
  • Goldman Sachs makes a market in the securities or derivatives thereof: Apple Inc.
  • Goldman Sachs is a specialist in the relevant securities and will at any given time have an inventory position, “long” or “short,” and may be on the opposite side of orders executed on the relevant exchange: Apple Inc.

News services at the opening bell today were attributing the drop in Apple’s share price to Goldman’s note.


  1. David Emery said:
    Hmmm… Wouldn’t trading on or marketing the information from Goldman’s banking arrangements with Apple constitute Insider Trading?

    June 2, 2016
    • Ken Cheng said:
      Equity research is generally at arms-length to Investment Banking’s Capital Markets group. Goldman’s banking arrangements are mostly routine debt offerings, share buyback arrangements. The only possible insider trading would be in the area of M&A where Apple might buy or invest in some smaller entity. Then early-trading in the acquired target would constitute possible insider trading. However, almost all of Apple’s M&A activity is with small private companies, that aren’t actively traded.

      June 2, 2016
  2. George Providaked said:
    There are two issues inherent with analysts reports. First is how is the company doing on fundamentals that is sales, income, average selling price, profit, etc. Apple has at best plateaued so far this year with expectations for the remainder of 2016 to grow income modestly at best. This certainly not a company on the ropes and most analysts see this as temporary and Apple will return to growth in 2017. As Icahn pointed out the stock market is vastly undervaluing Apple’s stock price based on fundamentals by multiple integer multiples.

    However, the analysts are paid to advise their clients on anticipated stock prices which appear to be weakly related to fundamentals. Investors appear more interested in speculative future narratives e.g., Amazon rather than current earnings, dividends, etc. So the analysts see lots of value in Apple stock, but the investors (stock price speculators) are not willing to buy the stock, this I believe drives the analysts predictions.

    So I think this analysts predictions were based on the fundamentals, but time has shown that for Apple fundamentals are at best weak predictions of Apple stock value and her re-assessment.

    June 2, 2016
  3. Ken Cheng said:
    One, it’d be hard for an investment bank of Goldman’s size NOT to be deeply involved in selling Apple’s debt, the largest debt offering around or providing possible M&A advice, etc.

    Two, Goldman’s equity research department is supposed to come up with their own financial analysis independent of whatever investment banking relationship they have, or trading position etc. Goldman’s equity research is more for their clients rather than their traders and fund managers.

    Three, it should be reassuring that these areas are independent, and don’t always agree.

    June 2, 2016

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