He kicked Apple—three times—while it was down, but now a top Apple analyst has come back into the fold.
From a note to clients issued Tuesday by Bernstein’s Toni Sacconaghi:
We note that Apple repurchased 6% of its shares traded in CY Q1; along with Warren Buffett’s share purchases, the two accounted for over 9% of shares traded in CQ1, putting a strong “buy bid” under the stock, and likely tempering investor skittishness. Looking forward, we believe Apple could repurchase 4% – 8% of its share volume per quarter over the next 4 – 6 quarters; Buffett’s recent rhetoric suggests he could also add to his already large position.
We see two impacts from strong repurchases: (1) a significant boost EPS to FY 18 and FY 19 EPS; (2) potential support for the stock. We note that IBM and Buffett accounted for a large percentage of IBM’s trading volume in 2011 and the stock fared well during the period, but there are few precedents in our coverage universe of sustained repurchases accounting for >5% of trading volumes.
Overall, we are incrementally positive on Apple following earnings.
Maintains Market Perform rating, raises price target to $190 from $170.
From his note: A handy Apple/Buffett stock purchase spreadsheet.
Plus, the history of Sacconaghi’s price targets.
My take: Sacconaghi used to believe in Apple. What happened?
See also:
As they say in Mass, “Light dawns on Marblehead”…
But your chart shows his target vs the -then current- price? Shouldn’t it show the price from a year later?
I’d always thought estimates were for “within a year”, not “at the end of a year”. It’d be nice to know what it really means. Heck, it may be different for each analyst….
I’ve been following price targets for some time. One of the metrics I watch is the length of time between revisions. The bulk of targets are revised within 6 months (most within 3 months). Very, very few issue targets that are revised only once a year.
The concept of one-year targets is a myth.
Yeah, that’s my new (-lack of-) understanding about “price targets’.
I believe the understood meaning (in the stock market industry) of a price target is *12 months from now*.
If that is not correct, the Pretender of Prognostication (Sacconaghi) should provide correction.
So you have no models for share repurchases of this magnitude, you predict that such share repurchases will have a significant boost to EPS and you think the share price will rise 2% from its current price.
Bold. Very bold
When he said last quarter he owns an iPhone 6 and not any new phones he lost all credibility as an analyst. He should have owned new ones to see the incremental improvements and Face ID. Buffet is a different story he recognized the share repurchases and dividend raises and how they were literally buying themselves back. Why bother with Sacconaghi. Not worth it.
Toni sees the light. Hallelujah!
Now that investment firms stocked up on deeply discounted AAPL shares during the panic they provoked, thank you Toni and company, they’ll gladly recommend people buy them at peak prices. Well, maybe not so peak prices but at a significant profit.
Your graph showing us the history of Mr. Sacconaghi’s price targets gives us a clue to “what happened”. He was guessing well over the actual price of AAPL for years, even as it sank farther and farther in 2015 and early 2016. Finally, the stock price turned around in July 2016 when Apple projected a revenue upswing for it’s fiscal 4th quarter that pleased Wall Street. He then resumed his bullish calls which worked great, even as the mirage of a “super-cycle” started to get promulgated. Until it all came a cropper when Apple’s revenue projections for Q1 fy ’18 popped that bubble. The stock price went into limbo for a quarter, and then came crashing down, at which time he reversed course – and actually pretty accurately called the bottom.
In the last couple of weeks, of course, we’ve seen a complete revisit of Apple in light of 1) their incredible cash stash, 2) their incredible free cash flow going forward, 3) the passage of the tax cuts, 4) the Big Reveal of Warren Buffett as part of a tag team supporting Apple’s buybacks, and 5) the facts finally coming out about the wild-fire success of the iPhone X.
Pretty understandable when you break it down, really. And what it indicates is that Mr. Sacconaghi is reactive, albeit less reactive than many other analysts. Ergo, this massive turnabout on his part is a clear indication of the lessons mentioned above finally beginning to sink in to the mass market consciousness.
So Apple closed today at $187.36, or $2.64 from Mr. Sacconaghi’s new price target.
This is what happens to reactive analysts who don’t know what the heck is really going on.
“My take: Sacconaghi used to believe in Apple. What happened?”
Did he really? I remember Sacconaghi as being a follower. The release of his targets always seemed to follow others. His reversal just before earnings was he following the negative rumors.
Since the March quarter, 2015 Apple has been buying back shares at an average rate of 4.6% (with a 0.01 Standard Deviation) YoY.
Using YoY share count is far more accurate than the percentage of quarterly volume. The Standard Deviation on quarterly volume is 1.14. Compare that to the Standard Deviation on YoY reduction (0.01).
Sacconaghi’s use of share volume is poorly chosen and does not accurately reflect what is happening with respect to share count reduction.
I thought I should add that for trends to be accurate thery need to be consistent with little deviation.
The percent reduction using volume ranges between 1.70 and 6.0.
The YoY range is 3.19 and 5.23.
He always has been “Toni the tool” with Apple. He has never been the source of any incisive analysis on Apple. This is an example of par for the course.
Ironically (or perhaps simply coincidentally), today is the first round of The Players Championship, and a lot of people be puttin’ their balls in the water.