Goldman Sachs raises Apple target $10 to Street-low $85 — updated

“Our negative thesis on Apple is based on ASPs remaining roughly unchanged in 2021” — Analyst Rod Hall

UPDATE: See Goldman Sachs ‘corrects’ yesterday’s Apple price target change

From a note to clients that landed on my desktop Thursday evening:

We expect Apple to report and guide well for FQ1 and FQ2 given consumer demand indications have been better through the holiday season. These solid consumer demand indications combined with likely strong continued WFH and SFH [work and study from home] related Mac and iPad demand helped by the launch of M1 Macs cause us to increase our numbers for Apple’s FQ1 and FQ2.

We also note the possibility for shorter term positive demand impact for iPhone in China driven by Huawei’s inability to produce phones.

On the other hand, we note here that Apple has already begun cutting iPhone orders and our checks also suggest a tilt toward lower ASP models in the most recent H1’21 build order revision. These changes are consistent, in our opinion, with a normal iPhone redesign cycle but are not consistent with a Super Cycle.

As a result we continue to expect iPhone replacement rates to resume their ongoing decline in 2021 and this drives our below consensus forecasts for the year and particularly for H2’21.

In addition, our negative thesis on Apple is based on ASPs remaining roughly unchanged in 2021 as consumers shift toward lower priced iPhones and this seems to be beginning to play out in supply chain orders. We believe the shift of consumer disposable income toward vacations, restaurants, and other outside of the home spending as re-opening occurs is likely to act as a negative catalyst for Apple’s stock just as COVID lockdowns represented a tailwind.

Maintains Sell rating, raises price target to $85 from $75.

Cue the price-target history:

My take: A grudging acknowledgement of “solid consumer demand.” Why Goldman Sachs continues to hold Apple in such bad odor is a mystery to me.

17 Comments

  1. Manfred Schwencke said:
    What a clown!
    A „courageous“ clown to stick to his rock-bottom price target for years while being at least 30% under water, also for years …

    2
    January 15, 2021
  2. Manfred Schwencke said:
    Ped, in the headline, the last „s“ is missing for Goldman Sachs.

    1
    January 15, 2021
  3. Greg Lippert said:
    Hey Rod, psst … Apple has more than one product. Oh, and you are wrong about that one.

    0
    January 15, 2021
  4. Fred Stein said:
    Oddly, his PT can be useful to write puts. Use his PT for puts one year out, and you’re safe even in a black swan event.

    2
    January 15, 2021
  5. Jerry Doyle said:
    I’ve seen some folk during my career sleepwalk through their jobs. In a competitive work environment these individuals soon are gone. In a bureaucratic work environment they make it to retirement. I never knew GS was such a buracracy. I always believed erroneously GS had a competitive work ethic. Rod Hall has to be a sleepwalker.

    1
    January 15, 2021
  6. Louis Muller said:
    How this guy is still employed is beyond me

    1
    January 15, 2021
  7. I always assign a Correction Factor to Rod Hall’s Price Targets. Roughly double his target (or ignore it altogether). Hall sometimes includes some gem of a factoid, likely turned up by an uncredited diligent researcher. Couldn’t find one in this piece. Every vacation, restaurant or venue I visited for the past decade held people avidly using their smartphones, later glancing at smart watches. Parents tote a tablet or two to keep kids occupied on the back seat. Those video arcades of the 70s and 80s now exist in everyone’s pocket. People learned a great deal about what their devices can do being cooped up with them for months. Laissez les bon temps rouler!

    3
    January 15, 2021
    • Bart Yee said:
      Agree, travel expansion for those that have not been hit hard, both leisure and business, will accelerate MacBook, iPad, iPhone, Hearables sales plus Services. Road trips need iPads, roadwarriors need new M1X MacBooks and AirPods Max, families will need AirPods and iPads to wind DOWN and catch up after a full day at Disneyland or Disney World. What is lacking in this GS analysis is the income lag for millions of Americans who are unemployed and the recovery of the job market. Until we see unemployment back to pre-pandemic levels, spending may spike with govt stimulus but only grow slowly as companies respond to slow growing demand changes.

      1
      January 15, 2021
  8. David Emery said:
    That chart is total bullshit. The relevant ‘control’ is AAPL’s stock price, not the S&P price. It’s intellectually dishonest, and just reinforces Hall as both a first class liar and a cheat.

    0
    January 15, 2021
  9. Michael Goldfeder said:
    Rod “Flip Phone” Hall hasn’t been right for the past two years, and won’t be right for three years in a row. Take a bow Rod as you must be reoriented with the old adage that: “Fool me once shame on you, fool me twice shame on me.”

    Maybe he got turned down for an Apple Card. He’s a hard one to figure out when it comes to his opinions on Apple.

    0
    January 15, 2021
    • Mark Visnic said:
      Before he was wrong about Apple at Goldman, he was wrong at JP Morgan. Why Goldman would want an analyst so off on the largest US market cap company raises more questions.

      Honestly though, to the extent the Goldman analyst has any negative influence on the price of AAPL, it’s a good thing for Apple’s and my capital allocation program!

      0
      January 15, 2021
  10. Mark Visnic said:
    It gets worse. Hall “corrected” the initial report of a price target increase to $85 from $75 by changing the increase to $80 according to my Bloomberg terminal.

    0
    January 15, 2021
  11. Mark Visnic said:
    It goes to the arbitrariness of price targets Philip. They are putatively based on models. Models are as much art as math. So, my guess would be a model output came in somewhere close to $85 and then he tweaked or discovered an input error that caused the discounted earnings model to come in closer to $80.

    The bigger question is why: a. he is chronically flawed in forecasting Apple’s business and, by extension, cash flow growth and price targets; and b. Why any self-respecting sell-side firm would want to perpetuate the flawed analysis? I have my theory based on experience. I’m in Boston. Once this Covid mess is over, I’ll share my view on it with you over drinks and dinner!

    1
    January 15, 2021

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