Look who put a ‘sell’ on Apple Monday

Who is Pierre Ferragu and what is New Street Research?

pierre ferraguFrom CNBC:

[The iPhone X] has been so successful that more and more iPhone users are upgrading early, eating into demand for future generations, according to New Street Research.

The vacuum in sales will be so great that investors should sell the stock, analyst Pierre Ferragu said in a note Monday.

 “We expect a material disappointment in 2019,” Ferragu said. “The iPhone X has been very successful and well received by consumers. It has been so successful, that we think it has brought forward demand.”

IPhone users upgrading early “will drive an ‘air pocket,’ and the introduction of a lower-price premium OLED phone won’t be enough to make up for the shortfall,” the analyst added.

Ferragu covered tech stocks for Bernstein for 10 years before joining New Street as head of its global technology infrastructure team.

Lowered rating to Sell from Neutral. Cut price target to $165 from $170.

My take: It seems the acorn doesn’t fall far from Toni Sacconaghi’s tree. I’ve asked for a copy of Ferragu’s note. [See UPDATE below]

See also: Here’s why Toni Sacconaghi says ‘Apple’s best days are behind it’

UPDATE: In response to my request for a copy of his note, Ferragu sent me this:

Dear Philip,

Thank you for your interest in our work. We are an independent research house, and distribute our research to subscribing clients. For our technology product, subscriptions start at $40,000 per year. Would you want to consider one?

Best
Pierre.

13 Comments

  1. Mark Visnic said:

    First, there were a wave of sell-side advisories suggesting the iPhone X was so unsuccessful that it would not survive the season. Now, we have someone with a no-name firm and an incentive to make a splash turning 180 degrees, to wit: the iPhone X was so successful that it, much like it’s older brother, the iPhone 6, pulled demand forward. I regret only that he doesn’t have enough persuasiveness to meaningfully impact the share price down.

    The irony is that the demand pull impact of the 6 was ignored for so long that it ultimately pulled Warren Buffett into the AAPL shareholder community.

    9
    August 20, 2018
    • Fred Stein said:

      I like the way you write. Nailed it.

      1
      August 20, 2018
      • Mark Visnic said:

        Thanks Fred. Doesn’t measure up to your contributions here!

        0
        August 20, 2018
    • Michael Thompson said:

      Pierre No-Name has a $530 price target on Worthless Tesla stock. One day Tesla will trade for essentially $0.00.

      This is all we need to know about Pierre.

      4
      August 20, 2018
  2. Fred Stein said:

    “I put a spell on you”, 1956 song written by Screamin’ Jay Hawkins. Best cover – Nina Simone.

    Meaning: If you want entertainment, it’s Nina, not Pierre. Nice beard though.

    0
    August 20, 2018
  3. Gary Morton said:

    Hmmm, who to believe? Warren Buffett, the most successful investor of modern times, or Pierre Ferragu the managing partner of a little known independent research firm. Anyone having a hard time making that decision should probably put their money into a mattress somewhere.

    2
    August 20, 2018
  4. Gregg Thurman said:

    Here’s what I find so disingenuous about Ferragu’s “pull forward” thesis.

    The iPhone 6 followed the iPhone 5S and was the first ‘large’ screen iPhone. Pent-up demand for a large screen iPhone was huge. iPhone Weekly unit sales jumped 57.1% YoY (December quarter) BECAUSE the iPhone 6 was such a deviation from the previous 4″ designs. The iPhone X did not cause any ‘pull forward’ as iPhone Weekly unit sales only increased by 6.35%. FQ1/2017 had 14 weeks in the period while FQ1/2018 had thirteen. 6.35% is a far cry from 57%. Additionally, the iPhone 6 sold in two models for a full quarter, while the iPhone X sold in one model for 2/3’s of the quarter. Lastly, any YoY comparison should be on revenue, not units sold, (after all the smartphone market has reached saturation) and with an increasing ASP iPhone revenue in FY2019 will be ~5% higher than FY2018 revenue. The same cannot be said of the follow-on iPhone 6S (FY2016 iPhone revenue declined 11.82% YoY).

    There literally is no commonality in the comparison of iPhone 6 to iPhone X unit sales results.

    I’m modeling Weekly unit sales growth of 1.33% this December quarter with full quarter YoY revenue growth of 4.36% driven primarily by YoY ASP growth of 2.99%.

    Ferragu’s analysis is, at best, shallow and childish. There’s a reason he works for a firm we’ve never heard of before today.

    3
    August 20, 2018
  5. Jonathan Mackenzie said:

    We’ve seen this movie before.

    No one would be talking about this guy if he merely initiated Apple at overweight. You have to go out on a limb to get any attention. And because markets are unpredictable, there’s a chance he’s right about selling AAPL right now. It could be 165 next spring. If it is, it won’t be for the reasons he’s saying, but he can say he called it. And if (as is much more likely) he’s way off base, most will forget the call and he’ll still have had his day of free publicity.

    1
    August 20, 2018
  6. Gregg Thurman said:

    “iPhone shipments are on a multiple-year decline trend”

    Not is you compare weekly unit sales. Comparing a 13 week quarter (FQ1/2018) vs a 14 week quarter (FQ1/2017) puts FQ1/2018 at a disadvantage, not to mention that the #1 selling smartphone (since launch) was only available for 8 of 13 weeks in FQ1/2018. Adjusting for that and adding another week to equalize quarter length put FQ1/2018 iPhone sales well over 80 million units for the quarter. There is nothing “declining” in that number.

    As I said previously, Ferragu’s “analysis” is shallow and childish, but makes for good reading if you are an Android fan.

    1
    August 20, 2018

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