Three who got Apple wrong

Here’s what these analysts were telling their clients before Apple’s share price took off.

From the Apple 3.0 archives:

February 2, 2018: Toni Sacconaghi, Bernstein: 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. Downgrade Apple to Market Perform and lower price target to $170 from $195. 

April 29, 2018: Tim Long, BMO: We are lowering our Apple estimates ahead of the May 1 earnings call, as we believe Apple will guide down on weaker iPhone expectations. We believe price elasticity and lengthening smartphone replacement cycles are mostly to blame, and we do not expect the issue to be solved by the next cycle. 

April 30, 2018: T. Michael Walkley, Canaccord Genuity: Ahead of Apple’s earnings report after the close on May 1, we are updating our iPhone estimates for both a greater anticipated inventory reduction during the June quarter and expectations for lower ASPs due to product mix. Our North American survey work and discussions with industry contacts indicate slow iPhone sales will likely persist until new products launch in September. Further, we anticipate Apple will clear channel inventory ahead of releasing three new iPhones in September 2018 to further segment its product offering based on price/features. Therefore, we are lowering our June iPhone estimate from 39.4M units to 34.5M units.

My take: Former Merrill Lynch analyst Henry Blodget was barred for life for hyping a company he didn’t believe in. What about downgrading a company that you do believe in? Is there no penalty on Wall Street for that?

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4 Comments

  1. Michael Thompson said:

    Penalty? There are outsized Christmas bonuses and regular appearances on CNBC to purposefully hoodwink the investing public and the institutions. Apparently even the “smart money” fell for the obvious disinformation.

    Without the huge buyback by Apple and purchases by Berkshire Hathaway in the 2nd quarter, we might have fallen all the way back to the 130s. It is not that far-fetched, we fell to 150.25 intraday. The selling across the board by institutions was massive. They used to hold 3.11 Billion shares and now hold 3.013 billion and that includes the nearly 75 million that Buffett bought. Apple needs to keep buying back stock from weak hands.

    Every share that Apple buys back and those purchased and held by Berkshire Hathaway make the easy game that the manipulators have engaged in, far more difficult.

    1
    May 17, 2018
  2. Gregg Thurman said:

    Walkley’s iPhone unit estimate is complete bullcrap.

    Apple guided $51.5 Billion to $53.5 Billion. My revenue estimate is $52.593 billion ON 43.55 MILLION iPHONES, which is in line with historic 20% QoQ declines. Shedding another 9 million units lowers my revenue estimate to $46.55 Billion. Since I began graphing Apple’s guidance (FY2010) Apple has NEVER missed the lower of revenue range.

    There is nothing in Apple’s product lineup that will make up the difference between the $46.55 Billion indicated by Walkley and Apple’s low of range revenue guidance of $51.5 Billion.

    All three are spewing carefully contrived narratives that do not address Apple’s revenue guidance.

    1
    May 17, 2018
  3. Fred Stein said:

    These little boys need to sit at the knee of the master, Warren Buffett, and learn a thing or two. Sign up for remedial middle school arithmetic too. Perfect timing – summer session.

    It is sad.

    0
    May 17, 2018
  4. Ken Cheng said:

    Blodget may have been barred for life from advising clients, but he seems to practically play the same role as a regular financial market pundit on CNBC.

    0
    May 17, 2018

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