Why Toni Sacconaghi downgraded Apple (video)

“We now believe the stock is relatively fairly valued.”

From an interview Bernstein’s Sacconaghi gave CNBC Friday morning:

We are a little bit nervous about the fact that Apple built quite a bit of channel inventory this quarter on a sequential basis. It was the highest build ever. And when something analogous happened two years ago during the iPhone 6s cycle, the company end up drawing down inventory and disappointing over the next couple of quarters. And so we worry a little bit that the numbers are more likely to still come down further rather than go up. And so on net we just think the risk/reward on the shares is pretty neutral even though the absolute valuation looks very reasonable.

Sacconaghi downgraded Apple to Market Perform from Outperform and lowered his price target to $170 from $195.

Video below. Catch it before it gets pulled.

My take: One man’s “very reasonable” valuation is another man’s opportunity to get into a quality stock. Investors who bought Apple during the iPhone 6S doldrums are sitting pretty now. Just sayin’.

3 Comments

  1. Fred Stein said:
    Toni expressed lots of worry.The market clearly shares the worry. His target reflects market sentiment.

    What’s the worry?

    One worry was based on Apple missing inflated numbers (Q1 and Q2 estimates) from analysts. Actual growth, on per week basis, was 20% and next Q looks like 16% YoY.

    The other worry is that iPhone may have finally reached a peak in sales. But Apple just demonstrated that non-iPhone businesses pull up the top and bottom lines.

    Tim and Luca hinted that buybacks and dividend increases will continue, potentially dialed up a bit.

    As all of the above improves the per share numbers, the worry will melt.

    1
    February 2, 2018

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