How does Goldman Sachs’ Apple analyst still have a job?

Other professional Apple watchers have been more down on the stock than Goldman’s Rod Hall, but few of them are still working on Wall Street.

apple goldman rod hallWhen Rod Hall started covering Apple for Goldman Sachs in February 2018, he was determined to shake things up. His predecessor, Simona Jankowski, had put Apple on Goldman’s “conviction Buy list” in the fall of 2015 when Apple was still trading, as Mark Andreessen famously put it, “like a steel mill going out of business,”

Jankowski had put forward a theory — she called it “Apple-as-a Service” — that Apple was more than a hardware stock, only as good as next year’s product line. She thought the days of measuring the company by counting iPhones unit sales might be coming to an end. “The smartphone battleground is shifting from unit land grab,” she wrote in a note dated Nov. 15, 2015, “to user monetization through content and services such as video, music, apps, games and payments.”

Hall, who had counted iPhones for J.P. Morgan, didn’t buy it. In his first Apple note for Goldman, dated Feb. 6, 2018, he cut Apple’s rating from Buy to Neutral and set a 12-month price just below the stock’s closing price — predicting, in effect, that for the next year Apple was going nowhere. “We are not permanent bears on Apple,” he wrote last September in a note titled “What would make us more positive?” “Our big picture view of Apple is that the iPhone is a very tough act to follow, with Services and Wearables not likely to be large enough to return the company to growth.”

By then, however, Hall’s reputation was in free-fall. He’d slashed his Apple price target a year earlier on the dubious theory that Apple’s accounting for TV+ spending was going to come back to bite them — a prediction that Apple felt obliged to contradict in a rare 25-word reprimand. Then last April, when the pandemic was slamming the U.S. markets, he cut his price target again — from a split adjusted $75 to a Street-low $58.25 — and told his clients it was time to sell.

apple goldman rod hall“So far it would be an understatement to say this call hasn’t worked,” he wrote last September, when Apple was trading above $120. Today, as Apple trades in a $130-$145 range, Hall still has the Street-low price target (currently $83) and is stubbornly sticking with his Sell rating. Fellow analysts have called his Apple opinions “tone deaf” and “fake news.” On CNBC, where Hall used to make guest appearances as a clever Apple contrarian, Jim Cramer now refers to him simply as that “Goldman guy.”

Every stock has its devil’s advocate, and Hall plays the role with relish. But the fact that Apple’s devil works for Goldman Sachs — one of Apple’s largest institutional shareholders, the lead investment bank for Apple bond offerings and the issuer of the prestigious Apple Card — has raised more than a few eyebrows. Says one vocal Hall critic, a friend-of-the-blog who posts here as Tommo_UK: “His commentary is so absurd, so asinine, so ill-informed in the face of the facts that there has to be something more than a rogue analysts being given a long leash.”

The rest is speculation. Tommo-UK’s theory centers on the Apple Card, for which Apple reportedly struck a hard bargain on terms and conditions. “Goldman may be covering themselves through arbitrage and hedging by making a market for Apple, handling their bond sales, acting in an advisory capacity and trying, as usual, to suck the blood out of both ends of the body too quickly.” Regular readers will recognize the blood-sucking metaphor as a reference to Matt Taibbi’s description of Goldman’s role in the great housing bubble of 2008: “A great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

Apple declined to comment on this story. Hall did not reply to an invitation to chat. Goldman Sachs issued a terse statement: “Our research is independent and our decisions on stock ratings are made based solely on analyst data and models.”

See also Apple 3.0’s Goldman Sachs archives. 

UPDATE: With one hand Goldman says to sell Apple, with another it recommends buying it. These news items came to me over the transom…

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21 Comments

  1. Tommo_UK said:
    I speculated about the Apple Card as a component of GS strategy but didn’t mention I thought it was money losing, just that Apple has unnecessarily struck a deal with the devil when they could have worked with Visa or MC direct, and that in fact

    I saw Rod Hall as a red flag for possible fraudulent activity caused by a lack of Chinese walls between the different areas of GS bazaar of service it conducts for Apple, from money management to making a market to issuing bonds and now the cards , all offering endless opportunities for arbitrage plays and illegal buy/sell side collusion paving the way for insider trading and manipulation.

    Sending mixed advice to clients based on their wealth and importance to GS is also part of their modus operandi and Hall, again, is the retail investor patsy.

    Perhaps, I speculated, one side of GS needed a drag on AAPL for their spiel to play out.

    I called Rod Hall the pasty in this game as the public face , so to speak.

    Afaik the Apple Card is profitable for GS, Apple merely struck hard terms.

    4
    February 17, 2021
    • David Emery said:
      “Sending mixed advice to clients based on their wealth and importance to GS is also part of their modus operandi” Any references on this?

      0
      February 17, 2021
      • Tommo_UK said:
        @David 20 years of trading experience including AAPLand 8 years of daily commentary and blogging intraday, and that’s all I’ll say 🙂

        0
        February 17, 2021
        • David Emery said:
          But to assert ‘different content to different folks’ would require -some basis- to be accepted… That might well be the case, but without any evidence, it’s just an assertion.

          0
          February 17, 2021
          • Tommo_UK said:
            @David you’ll appreciate the potentially litigious nature of these discussions going into detail and resting in references. If you’d rather think Wall Street’s best snake oil salespeople wash their hair every day, your choice 🙂

            1
            February 17, 2021
            • David Emery said:
              Of course, US and UK laws on libel are quite different.

              What I don’t see any obvious case for is an assertion that different classes of investors get different advice. That G-S uses different advice for its own investors than that provided to the public is something I’d believe and even expect.

              0
              February 17, 2021
    • “I am seriously confused by the G-S chart. Does this not show Apple’s actual price at the time of the estimate?”

      Blue line is AAPL. Grey line is S&P500. Square dots are price target changes. Lots of ’em, since April all well below the blue line.

      1
      February 17, 2021
      • David Emery said:
        So at best Hall is a ‘trailing indicator’ What would be a lot more relevant is Hall’s predictions vs APPL Share Price 1 year later!

        1
        February 17, 2021
  2. Jerry Doyle said:
    I only can assume Apple wanted association with GS’s prestigious brand name as Apple easily could have consummated a financial relationship with any other economic institution. Something is going on inside GS relative to its analyst making these ludicrous assessment of Apple’s stock performance and Rod Hall becoming the person to whom the blame will fall.

    On the surface Rod Hall is the incompetent analyst making these absurd projections provoking public derision but at what point do his outlandish projections blowback on GS as being involved in some nefarious activity relative to Apple; and, at what point does Apple feel compelled to do scrutiny as to why Rod Hall makes these obvious farcical analytic projections? Like PED in his “my take” above, something is going to evolve into a day of reckoning because too much publicity relative to all this being some form of corruption, and perhaps unlawful, is becoming evident to the common retail investor on the street who already is suspect of WS financial shenanigans.

    5
    February 17, 2021
  3. Gregg Thurman said:
    our decisions on stock ratings are made based solely on analyst data and models.”

    No, they are not. The “data” clearly shows that Apple revenue has INCREASED 17% since FY2015, a period during which Hall has had a sell recommendation on the equity.

    Other firms may have performed better, but few equities have, growing >250% since Hall issued his sell recommendation.

    5
    February 17, 2021
    • Gregg Thurman said:
      Here’s another “data” point that GS is overlooking (goes directly to Hall’s statement that Services will not replace iPhone revenue):

      “As of January 2021, mechanical royalties from streaming in the U.S. will be processed and paid out by The MLC at no cost to songwriters or music publishers,” said MLC.

      Spotify dished out $152.22 million, Apple Inc AAPL 1.14% transferred $163.33 million and Amazon.com, Inc AMZN 0.43% paid $42.74 million.

      These numbers are not estimates. They are the actual numbers collected by, and paid out to artists, by Mechanical Licensing Collective.

      On the surface, it would appear that Apple has more PAYING subscribers than does Spotify.

      4
      February 17, 2021
  4. David Emery said:
    I am seriously confused by the G-S chart. Does this not show Apple’s actual price at the time of the estimate?

    0
    February 17, 2021
  5. Ken Cheng said:
    I respect Tommo’s opinion, but there are way too many moving parts in his theory for it to work. Think Occam’s Razor. The simple answer which requires no conspiracy and complex level of moving parts is Rod Hall is an outlier whom no one listens to.

    Cramer was a trader at Goldman, and his lack of respect for Hall is exactly how their traders view the research department. For your theory to work, Hall’s work has to be disseminated widely, but Goldman’s equity research goes out to its institutional and wealthy clientele, not the general investing community.

    2
    February 17, 2021
    • Tommo_UK said:
      @ken the simple answer and in accordance with Occam’s Razor is that here IS multi-layered and institutionalised fraud going on, because it’s by far the simplest explanation given the description of GS activities and involvement on behalf of Apple, yet maintains an analyst like Hall.

      There’s a multi-faceted aspect to this con layered like an onion but few companies have as much visibility and inside knowledge and involvement in Apple’s finances and affairs as GS. The value of the matrix of information as a trading edge shared unlawfully between departments is almost incalculable and positions GS uniquely to benefit from the shenanigans which the last few years are littered with.

      The most unlikely explanation us that in spite of everything we know about GS and it’s intricately woven relationship with Apple, given the nature of the organisation it isn’t abusing that privileged position.

      I should add that Hall isn’t a keystone to the GS con but helps. My observations were meant to be viewed jointly and separately.

      1
      February 17, 2021
    • Mark Visnic said:
      @Ken
      “For your theory to work, Hall’s work has to be disseminated widely, but Goldman’s equity research goes out to its institutional and wealthy clientele, not the general investing community.”

      Hall’s “work” is disseminated much more broadly. You don’t have to be a Goldman muppet .. I mean client …. to know what Hall’s position on AAPL and Apple is. CNBC and other financial media outlets trot him out to convey his message repeatedly. Goldman thanks them for it.

      3
      February 17, 2021
  6. William Baggs said:
    I expect Mr Hall is more an operative of the derivatives business than equity. You don’t sell options contracts when there is certainly.

    0
    February 17, 2021
  7. Joe Murphy said:
    @ “Jankowski had put forward a theory — she called it “Apple-as-a Service” — that Apple was more than a hardware stock, …”

    So, G-S had an analyst, Jankowski, who had a new and different perspective on Apple.

    Looking at the market, Jankowski nailed it. G-S replaced her with Hall, whose reputation was in free-fall for his dubious Apple theory.

    Employers receive what they want or their responsibility is retrain/replace.

    G-S continues to employ Hall.

    Actions speak louder than words.

    7
    February 17, 2021
  8. Aaron Belich said:
    Simona Jankowski is now at Nvidia, that’s a nice step up.

    0
    February 17, 2021
  9. Joe Murphy said:
    Btw, until now, I had overlooked you wrote this.

    Super job Philip.

    This was a deeper and thorough look at G-S and Hall, reminding me of the how much I like your writing. Keep it up.

    0
    February 18, 2021

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