Goldman Sachs flips its Apple bozo bit

Our original view that the iPhone cycle would disappoint in the midst of COVID was clearly wrong.” — Analyst Rod Hall

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

We are upgrading our rating from Sell to Neutral after Apple posted another large beat and implied a raise vs. our June revenue expectations. Our original view that the iPhone cycle would disappoint in the midst of COVID was clearly wrong. Not only has Apple done better than we expected on iPhone during the cycle but Mac and iPad have also materially outperformed our forecasts. iPad demand is so strong that the company believes they will leave $3bn-$4bn of revenue on the table in FQ3 to June.

With this kind of demand backlog and a very difficult re-opening forecasting environment, we are moving to the sidelines here.

Since we added AAPL to the Americas Sell List on 16 April, 2020, the shares are up 86% vs. the S&P 500 up 49%. (emphasis mine)

Our forecasts move up to match the beat and June revenue indications and are now closer to consensus. While we continue to believe current levels of demand are likely to be tough to sustain, we equally acknowledge that high-end consumers have proven far more resilient through the pandemic than we expected. Our 12-month price target moves up to $130.

Lifts rating to Neutral from Sell, raises price target to $130 from Street-low $83.

My take: Never have I seen a high-profile Apple analyst be so wrong for so long.

19 Comments

  1. Adam Foster said:
    Rod Hall – $47 bump and Neutral… embarrassing!

    12
    April 29, 2021
    • Romeo A Esparrago Jr said:
      Yep, who’s the bozo now?
      Woops, always been.

      12
      April 29, 2021
  2. Bart Yee said:
    I wrote this yesterday but it just came out of moderation:
    “@Matthias That’s what is so confounding about Hall, he’s got seemingly accurate data about most of the business segments. On the Pro side, he’s 1st Mac, 2nd iPad, 2nd Wearables, tied for 4th in Services. But he’s dead last in iPhones (off by 30%) which throws off his 4th from last Gross Revenue by 17.2% which really throws off his EPS estimate. For a supposed iPhone counter, IMO, he hasn’t done that very well last quarter. That’s a bigger miss on iPhones than his 9.4% miss for Q1 and Revenue miss by 5.87%.
    And then to interpret his findings (of actual improved growth across the board) and say because of “pressure on Services revenue” sell with a price target of $83 reiterated this last April Fool’s day (how ironic and apropos)? Its astounding how his interpretations are so contrary to the visible direction Apple is heading.

    I suspect he will issue a revised price target in the upper 80’s/low 90’s, saying for Apple, this growth isn’t sustainable, next year’s comps will be brutal, yada yada, and still say SELL.”

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    April 29, 2021
    • Bart Yee said:
      “Our original view that the iPhone cycle would disappoint in the midst of COVID was clearly wrong. Not only has Apple done better than we expected on iPhone during the cycle but Mac and iPad have also materially outperformed our forecasts.”

      Duh!!

      “With this kind of demand backlog and a very difficult re-opening forecasting environment, we are moving to the sidelines here.
      Since we added AAPL to the Americas Sell List on 16 April, 2020, the shares are up 86% vs. the S&P 500 up 49%.”

      Hall is supposed to be an analyst, and presumably, some type of forecaster for his firm and clients. Isn’t that what he’s paid to do, accurately, or at least in the right direction? If he can’t forecast, at least present scenarios of bear, neutral, bull, don’t cop out and beat a hasty retreat “to the sidelines”. Hall is essentially saying AAPL is dead money by claiming no change up or down for “his” foreseeable future. While I’ll give him that the market may not reward AAPL consistently, how long can it ignore this type of “growth” when Apple was declared unable to grow ever again???

      9
      April 29, 2021
      • Bart Yee said:
        This is what really is eye-popping:
        “While we continue to believe current levels of demand are likely to be tough to sustain, we equally acknowledge that high-end consumers have proven far more resilient through the pandemic than we expected. Our 12-month price target moves up to $130.

        Lifts rating to Neutral from Sell, raises price target to $130 from Street-low $83.”

        High end consumers have been, were, & always will be the most resilient in pandemics, downturns, & recessions. We knew that for most over the last 25 years, precisely because they have resources, options, & better decision making – that’s how they got to where they were/are! IMO, this same group will continue leading Apple’s charge forward.

        But here’s the kicker – middle/upper middle consumers worldwide who were pandemic hit harder & taking more recovery time are seeing light at tunnel’s end. IMO, as world economies one by one stabilize/recover, more jobs, income, & lives will turn around. Similarly, their Apple products & services needs will also ramp up, especially w/value added attractively priced Apple products (see discounted iPhone 12’s + 1st gen M1 hardware this coming Sept.-Oct.). This will add additional wind to Apple sails/sales. Is this so hard to see?

        IMO, it is apparent Hall just will not take a chance w/his “forecasts” & would prefer to be “not wrong” instead of “probably right”. You miss 100 percent of balls/hockey pucks you never swing at.

        9
        April 29, 2021
      • Romeo A Esparrago Jr said:
        “ Our original view … “
        He should be accountable for his words and say “I” and “My”.
        Can’t wait to see him get Q’d about all “his” work leading up to this on broadcast news.

        12
        April 29, 2021
    • Bart Yee said:
      Nice and to the point, but next time don’t hold back so much.

      9
      April 29, 2021
  3. Cy Manning said:
    Hall has the stock picking ‘alpha’ of a coin toss. Although, I’d bet the coin would crush his returns.

    10
    April 29, 2021
    • Bart Yee said:
      IMO he’d do much better with a Magic 8 Ball.

      10
      April 29, 2021
    • Paul Brindze said:
      @Cy Manning . Insulting to coins!!!

      9
      April 29, 2021
      • Romeo A Esparrago Jr said:
        Good one, Paul 😀

        7
        April 29, 2021
      • Cy Manning said:
        @Paul Brindze haha . . . perhaps, but if a coin hits 50% probability, isn’t it doing it’s job rather well?

        7
        April 29, 2021
  4. Mark Visnic said:
    Hall still doesn’t “get it.”

    “ … we equally acknowledge that high-end consumers have proven far more resilient through the pandemic than we expected.”

    He mistakes Apple’s products for luxury goods consumed only by “high-end consumers” and completely misses the compelling functionality of the ecosystem and it’s equally compelling draw.

    10
    April 29, 2021
    • David Emery said:
      1 billion “high-end consumers” can’t be all wrong…

      5
      April 29, 2021
    • Bart Yee said:
      @Mark Although I’m sure many of them would not embrace the moniker of “high end consumer” the demographic that pretty much all other companies would love to capture and hold dear is the DIVERSE teenage to young adult + the up and coming ASPIRATIONAL new wage earner. IMO, Apple has remained steadfast in speaking to this audience, holding to & meeting agreeable and lofty PRINCIPLES and ACHIEVABLE GOALS & DREAMS (especially regarding the ENVIRONMENT and humanistic goals), and always featuring THEM in use scenarios, advertising, and marketing. It’s no wonder that this demographic holds Apple in such high regard, is willing to spend (hard earned or gifted) money for products and services, and isn’t afraid to embrace and use the Apple ecosystem to PRODUCTIVELY GET THINGS DONE and ENJOY INTERACTING at the same time.

      Rinse and repeat in different ways for DIVERSE older adults who discarded an overly complicated tech lifestyle for Apple products/services that “JUST WORK”, provide long term SUPPORT, VALUE & RELIABILITY (like THEM), and thoughtfully address the END-TO-END USER EXPERIENCE for US like no other. And of course, secondarily providing a highly successful investment model / company one can plainly UNDERSTAND and USE to achieve FINANCIAL INDEPENDENCE & FREEDOM.

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      April 29, 2021
      • Mark Visnic said:
        @Bart

        Agree, it has aspirational brand force and so many of the sell-side analysts are tone deaf to that aspect. The stickiness of 660,000,000 subscribers and counting should be clearer to them than even an installed base of 1,000,000,000 + with 97% satisfaction. Add the pipeline of products engendered by the cash flow the business model generates and think about India and advertising and it argues for a 40 multiple without stretching.

        1
        April 29, 2021
  5. Ralph McDarmont said:
    I recommend early retirement. Uber might be ok.

    1
    April 29, 2021

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