Sacconaghi sees the light, raises Apple price target

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.

sacconaghi sees light

Plus, the history of Sacconaghi’s price targets.

sacconaghi sees light

My take: Sacconaghi used to believe in Apple. What happened?

See also:

15 Comments

  1. David Emery said:

    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?

    0
    May 9, 2018
  2. David Humphrey said:

    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

    3
    May 9, 2018
  3. Warren Zimmerman said:

    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.

    1
    May 9, 2018
  4. Gianfranco Pedron said:

    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.

    0
    May 9, 2018
  5. Gregg Thurman said:

    “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.

    2
    May 9, 2018
  6. Gregg Thurman said:

    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.

    1
    May 9, 2018
  7. Gregg Thurman said:

    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.

    1
    May 9, 2018
  8. Mark Visnic said:

    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.

    3
    May 9, 2018
    • David Drinkwater said:

      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.

      0
      May 10, 2018

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