Goldman bumps Apple from Conviction Buy list

[AppleInsider]

Goldman Sachs on Thursday dropped Apple from its Conviction Buy list, citing the potential for negative speculation in the months leading up to the company's June iPhone launch.

"We are removing Apple from our Conviction Buy list but leaving it as a Buy," explained analyst David Bailey. "We continue to view Apple as a stock that should be bought on dips over the next 3-4 months during the anticipation period in front of iPhone."

Since Goldman added Apple to its Conviction Buy list on September 8 2006, the stock has been up 18.8 percent versus the S&P 500's 11.6 percent. But Bailey said the next few months leave the company vulnerable to negative sentiment, making shares of Hewlett-Packard slightly more attractive.

"The major risk to Apple," Bailey wrote in a note to clients, "is that it is a high expectations, high beta company that has to get through the next 3 months -- which also happens to coincide with what is often one of tech's weaker quarters -- without a specific catalyst."

At the same time, the analyst noted that speculation about the strength of Mac sales and initial iPhone orders could pop up occasionally, leading to a "somewhat nosier" March quarter.

"Despite iPhone's presumed June shipment date, we see it as breaking enough new ground to enable Apple's growth to continue at or above-20 percent levels, biased still to the upside," he wrote. "In fact, our preliminary base case analysis, assuming 25 percent video iPod cannibalization in calendar 2007 and 50 percent in 2008, concludes that iPhone alone could add an incremental [4 to 5 percent] to Apple's revenue growth in those two years."

Bailey maintained his 12-month price target of $110 on shares of Apple, explaining that as a growth company, he bases valuation of price-earnings ratio, growth-adjusted earnings multiples, cash flow metrics and discounted cash flow.

[ View this article at AppleInsider.com ]

[CosmoNut]

Apple is DOOMED! They're going out of business! It's the beginning of the end! CONFIRMED!

(someone had to say it)

[Guartho]

They should liquidate and return the money to the stock holders. That's what I'd do.

[b3ns0n]

He's kinda right. From my POV it's looking like with weaker Mac sales in the run-up to leopard, seemingly no "true HDD video iPod" on the horizon and the iPhone waiting until June, that the next few months could be the time to buy in if you haven't already.

[macFanDave]

Are we supposed to buy Enron, WorldCom, Tyco, Adelphia, etc. after their top management gets convicted?

I bought my first Apple stock 10 years ago, based on my conviction that Macs were still great and I was happy with my new Performa 6400, so I thought the company had a future. The analyst community unanimously stated that Apple was doomed, but I thought different. Was that a "conviction buy?"

[anantksundaram]

Originally Posted by macFanDave

Are we supposed to buy Enron, WorldCom, Tyco, Adelphia, etc. after their top management gets convicted?

I bought my first Apple stock 10 years ago, based on my conviction that Macs were still great and I was happy with my new Performa 6400, so I thought the company had a future. The analyst community unanimously stated that Apple was doomed, but I thought different. Was that a "conviction buy?"

Brilliant.

[anantksundaram]

Originally Posted by AppleInsider

But (Goldman Sachs analyst) Bailey said the next few months leave the company vulnerable to negative sentiment, making shares of Hewlett-Packard slightly more attractive.

Huh? What does that mean?

[lkrupp]

One thing that Warren Buffet repeats over and over again is to NOT buy stock in a company whose business you do not understand. Most analysts and stock traders don't have a clue what Apple is all about, why they do what they do, and what makes Apple tick. The analysts consistently try to pigeonhole Apple into a nice, predictable model they can deal with. The fact is Apple is not like other companies its size, does its own thing, and continually confounds the analysts' predictions. Those of us who have been customers of the company since 1977 (in my case 1982) have a pretty good handle on who we are dealing with. Goldman Sachs is trying to give good financial advice to their clients but they just don't truly understand Apple yet.

[Apple2Mac]

I think the street rarely understands apple, they expect apple to fit into traditional business plans and growth patterns, but apple doesn't have a traditional customer base or product roadmap, so it out performs wall streets expectations all the time..