Goldman Sachs sees Apple stock stagnant for a year, slashes estimate

Posted:
in AAPL Investors edited November 20
After only restarting coverage on Apple stock in early 2018, Goldman Sachs has cut its stock price forecast dramatically, because of perceived lack of demand for the iPhone XR, and lack of enthusiasm for Apple products in China.

Tim cook with Jony Ive at the iPhone XR rollout
Tim cook with Jony Ive at the iPhone XR rollout


"In addition to weakness in demand for Apple's products in China and other emerging markets it also looks like the balance of price and features in the iPhone XR may not have been well-received," Rod Hall wrote in a note to investors seen by AppleInsider. "Our estimates remain at the lower end of Apple's guidance range at this point as we believe the company likely included this more negative scenario in its provided range."

Hall also cited "severe Chinese demand weakness in late Summer and a stronger U.S. dollar" for reasoning behind the firm's latest prognostications.

Hall had little else to say in the note, other than cutting the price target for the stock to $182, down from the previous estimate of $209. Before market opening on Tuesday, Apple stock is valued at $181.93, hit nearly 20 percent of its value since the earnings report. In September, Goldman Sachs had a price target of $240 that the firm raised because it badly missed guesses at iPhone X sales volumes.

It isn't clear where Hall is getting his data, however. The iPhone XR has been available for a month, and Apple hasn't released any sales figures.

In all likelihood, Hall is drawing from lower-than-expected component orders made by Apple previously cited as signs of weakness in the iPhone market several times by other analysts in the last month. Historically, those data points have ultimately resulted in little real-world effect as demonstrated by Apple's actual results.

In the last quarter's financial earnings report, Apple forecast a wider revenue range than normal between $89 billion and $93 billion, twice as wide as usual. Should Apple hit even the $89 billion low-end target, it will be the company's largest holiday quarter in history.

Apple's decision to stop providing unit sales figures appears to be shaking analysts, as it will make forecasting seasonal sales much harder to predict. There has also been a warning from CEO Tim Cook to anticipate a softer forecast than analysts would usually expect, partly caused through the relatively late introduction of the iPhone XR and foreign exchange rate issues.

Cook has also previously suggested that relying on supply chain metrics to predict iPhone demand is folly. "I've never seen one that's even close to accurate," the executive said in 2015 regarding supply chain estimates, with variations on the same theme since.
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Comments

  • Reply 1 of 36
    flaneurflaneur Posts: 4,471member
    “Apple's decision to stop providing unit sales figures appears to be shaking analysts . . .” Good.
    ericthehalfbeechristophbdws-2llsorens
  • Reply 2 of 36
    SoliSoli Posts: 8,403member
    Apple stocks drop… analysts drop estimates.
    Apple stock goes up… analysts raise estimates.

    What exactly do they offer if they're just going to react after the fact?

    edited November 20 SpamSandwichRayz2016retrogustobrucemcllsorens
  • Reply 3 of 36
    Seems like a good time to buy again. Or for Apple to do another buyback.
  • Reply 4 of 36
    And Apple is down 4% this morning, Amazon too. Nasdaq down 2%. DOW, S&P and NASDAQ have now all gone negative for 2018. I wonder how much of this is a legitimate correction vs unnecessary panic.
  • Reply 5 of 36
    Seems like a good time to buy again. Or for Apple to do another buyback.
    Apple announced on the earnings call that they have 71 Billion earmarked for buy backs so they may increase that amount if this continues 

  • Reply 6 of 36
    Xiaomi up 8% today. Looks like they are poised to take more market share. This really wasn't the best time for Apple to be hiking prices across all its lines.
    atomic101
  • Reply 7 of 36
    As the CEO of Goldman Sachs once testified to Congress, if you do business with Goldman you need to be savvy enough to know when the company is deliberately misleading you about investments.
    DAalsethjasenj1nimpeachabletech
  • Reply 8 of 36
    Seems like a good time to buy again. Or for Apple to do another buyback.
    I’m expecting more sudden, severe drops. AAPL is down about 20% in a month. That’s already a bargain, but we’re in a bear market now. Be patient and you’ll really clean up as others continue to panic sell.
    magman1979
  • Reply 9 of 36
    As the CEO of Goldman Sachs once testified to Congress, if you do business with Goldman you need to be savvy enough to know when the company is deliberately misleading you about investments.
    Example:  https://uk.mobile.reuters.com/article/amp/idUKKCN1NI0D4
    emoellermelodyof1974
  • Reply 10 of 36
    Dead_Pool said:
    Xiaomi up 8% today. Looks like they are poised to take more market share. This really wasn't the best time for Apple to be hiking prices across all its lines.

    Market share from who? Certainly not Apple.
    SpamSandwichretrogustomagman1979fastasleep
  • Reply 11 of 36
    Dead_Pool said:
    Xiaomi up 8% today. Looks like they are poised to take more market share. This really wasn't the best time for Apple to be hiking prices across all its lines.
    Xioami isn’t worthy. They’re a bunch of copycat hacks and scum.
    magman1979nimpeachabletech
  • Reply 12 of 36
    The recent 20% decline in Apple stock price is not based on any credible data.  Some claim that it is because Apple changed its policy of divulging unit sales and average sales prices of IPhones, IPads, and Macs.  Others attribute the drop to unit sales not increasing.  Neither of these can be true because no other cell phone company divulges unit sales and average sales prices and it is wrong to penalize Apple for deciding against this practice.  They will continue to report revenues and earnings.  The fact that unit sales did not increase should not be bothering anybody.  In case nobody noticed, Apple had a 27% increase in iPhone revenues last quarter, despite the lack of increase in unit sales.  Apple had a choice, sell few units and make more money or sell more units and make less money.  They chose the former and I don’t think that any shareholder should fault them for making that decision.  

    It is likely that the decline of Apple share represent two factors occurring simultaneously.  

    First, many articles have reported that suppliers have cut back on the parts they are delivering.  As pointed out by Tim Cook and others, these are not reliable indicators of iPhone sales for many reasons.  First, there will always be cutbacks.  After all, companies order parts for manifacturing and companies reduce those orders when their planned manufacturing run has been fulfilled.  Nobody knows, least of all stock analysts, whether these cutbacks mean a reduction in the number of units that are being sold.  People should also remember that many manufacturers are using some of these component manufacturers and cutbacks could also represent the general decline in smartphone sales.  

    Second, the entire stock market is falling.  Previously high flying stocks such as Amazon and Facebook have lost 25% or more of their value.  Stock fund managers are rushing to take their profits before the market drips further.   In my opinion, falls of Amazon and Facebook are warranted because Amazon is extremely overvalued and Facebook is having serious problems with protecting their user data.  On the other hand, no bad news has emerged since its spectacular Q4’18 earnings report.  In fact, Apple news has been very positive. Apple’s China business is looking up, the first cooperative agreement between China and the U.S. was announced suggest s beginning to the end of the trade war.  Reviews of the iPhone XR, iPad Pros, and MacBook Air have been glowingly positive.  

    Analysts appear to be ignoring to striking new developments:  Apple has opened up its own online store refurbished Apple products and many large retailers (Walmart, Bestbuy, Target, Costco) are selling iPhone 6, 6s, 7, X, and 8 for very low prices.  The fact that Apple has started selling its own refurbished products tells you that this market has grown large enough for Apple to try to take a cut.  Older models of Apple iPhones will be taking market share away from cheaper Androids.  Which one would you rather have, an iPhone X or any Samsung or Huawei smartphone for the same price?  Apple has found a way to grab market share from Android makers.  By leapfrogging all the other smartphone makers in terms of technology, Apple now can offer year old or even two year old technology for the same or lower price as their competitors.  I think that Q1’19 sales will pleasantly surprise many people, even diehard Apple fans. Goldman Sachs will be kicking itself for giving its customers bad advice.
    MacPromagman1979llsorensradarthekatnimpeachabletech
  • Reply 13 of 36
    wisey said:
    The recent 20% decline in Apple stock price is not based on any credible data.  Some claim that it is because Apple changed its policy of divulging unit sales and average sales prices of IPhones, IPads, and Macs.  Others attribute the drop to unit sales not increasing.  Neither of these can be true because no other cell phone company divulges unit sales and average sales prices and it is wrong to penalize Apple for deciding against this practice.  They will continue to report revenues and earnings.  The fact that unit sales did not increase should not be bothering anybody.  In case nobody noticed, Apple had a 27% increase in iPhone revenues last quarter, despite the lack of increase in unit sales.  Apple had a choice, sell few units and make more money or sell more units and make less money.  They chose the former and I don’t think that any shareholder should fault them for making that decision.  

    It is likely that the decline of Apple share represent two factors occurring simultaneously.  

    First, many articles have reported that suppliers have cut back on the parts they are delivering.  As pointed out by Tim Cook and others, these are not reliable indicators of iPhone sales for many reasons.  First, there will always be cutbacks.  After all, companies order parts for manifacturing and companies reduce those orders when their planned manufacturing run has been fulfilled.  Nobody knows, least of all stock analysts, whether these cutbacks mean a reduction in the number of units that are being sold.  People should also remember that many manufacturers are using some of these component manufacturers and cutbacks could also represent the general decline in smartphone sales.  

    Second, the entire stock market is falling.  Previously high flying stocks such as Amazon and Facebook have lost 25% or more of their value.  Stock fund managers are rushing to take their profits before the market drips further.   In my opinion, falls of Amazon and Facebook are warranted because Amazon is extremely overvalued and Facebook is having serious problems with protecting their user data.  On the other hand, no bad news has emerged since its spectacular Q4’18 earnings report.  In fact, Apple news has been very positive. Apple’s China business is looking up, the first cooperative agreement between China and the U.S. was announced suggest s beginning to the end of the trade war.  Reviews of the iPhone XR, iPad Pros, and MacBook Air have been glowingly positive.  

    Analysts appear to be ignoring to striking new developments:  Apple has opened up its own online store refurbished Apple products and many large retailers (Walmart, Bestbuy, Target, Costco) are selling iPhone 6, 6s, 7, X, and 8 for very low prices.  The fact that Apple has started selling its own refurbished products tells you that this market has grown large enough for Apple to try to take a cut.  Older models of Apple iPhones will be taking market share away from cheaper Androids.  Which one would you rather have, an iPhone X or any Samsung or Huawei smartphone for the same price?  Apple has found a way to grab market share from Android makers.  By leapfrogging all the other smartphone makers in terms of technology, Apple now can offer year old or even two year old technology for the same or lower price as their competitors.  I think that Q1’19 sales will pleasantly surprise many people, even diehard Apple fans. Goldman Sachs will be kicking itself for giving its customers bad advice.
    Traders also simply fall into buying or selling based on momentum. Markets will fall simply because they are falling.
    magman1979
  • Reply 14 of 36
    If you are a long term investor, there isn't much to really fear-- the stock is trading at a PE of 15, has a yield of 1.5%, and has some huge backstops to its underlying business. 

    I would attribute most most of the drop to general market concern and just taking profits. I had scheduled a sale for January for tax reasons myself, need to re-think my plan personally.

    That said, a part of me thinks we will see $160 before we see $210 again.  Hope Apple is "backing up the truck" on the drop though. 
    jasenj1magman1979
  • Reply 15 of 36
    If you are a long term investor, there isn't much to really fear-- the stock is trading at a PE of 15, has a yield of 1.5%, and has some huge backstops to its underlying business. 

    I would attribute most most of the drop to general market concern and just taking profits. I had scheduled a sale for January for tax reasons myself, need to re-think my plan personally.

    That said, a part of me thinks we will see $160 before we see $210 again.  Hope Apple is "backing up the truck" on the drop though. 
    “Be greedy when others are fearful and fearful when others are greedy.”
    magman1979
  • Reply 16 of 36
    Rayz2016Rayz2016 Posts: 4,455member
    Dead_Pool said:
    Xiaomi up 8% today. Looks like they are poised to take more market share. This really wasn't the best time for Apple to be hiking prices across all its lines.
    Yes it was. If it brings in more revenue then it makes perfect sense. 

    This is happens every single quarter, and folk still don’t get it. The perceived lack of demand is because analysts don’t understand the supply chain (not just Apple’s– they don’t get how supply chain works in general). 


    jdb8167magman1979fastasleepnimpeachabletech
  • Reply 17 of 36
    Dead_Pool said:
    Xiaomi up 8% today. Looks like they are poised to take more market share. This really wasn't the best time for Apple to be hiking prices across all its lines.

    Market share from who? Certainly not Apple.
    Says Dead Pool💀his brian freezes 
  • Reply 18 of 36
    Thanks to Google (Android), shameless Chinese hardware copycats are able to freeload off Apple’s innovation and industrial design and price accordingly. Google will continue to destroy American business and individual privacy in the name of targeted ad revenue. Apple needs to unleash its next earthshaking product already. No way they’re spending $15+ billion a year in R&D for smaller iPad bezels. What do you have brewing in those secret labs of yours, Tim? And when the ‘ell will it be ready?
    nimpeachabletechSpamSandwich
  • Reply 19 of 36
    At one point today Amazon was down almost 4%. Right now it’s positive. Apple still down almost 3%. I don’t see it turning around anytime soon. This weak iPhone sales narrative will hang out there until Apple reports earnings.
  • Reply 20 of 36
    brucemcbrucemc Posts: 1,469member
    Seems like a good time to buy again. Or for Apple to do another buyback.
    I’m expecting more sudden, severe drops. AAPL is down about 20% in a month. That’s already a bargain, but we’re in a bear market now. Be patient and you’ll really clean up as others continue to panic sell.
    That may be the case, and there is certainly the adage of to be "careful of trying to catch the falling knife".  But the other viewpoint is that no one knows the future, and if you hesitate to make a purchase then you could lose out on the upside (you want to purchase at $175, it hits $176 at is lowest point, and you have foregone the chance).  I am nibbling on these dips.
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