Following Apple'sdowngrade parade early this morning, I suggested that the dithering on Wall Street was going to be "right," whether it was or not simply because it stood to become a self-fulfilling prophecy. The two key reports driving Apple shares lower today come from RBC Capital and Morgan Stanley.
In the RBC report, analyst Mike Abramsky is concerned because data from a recent survey the firm conducted showed 29 percent of respondents plan to purchase a Mac laptop in the next 90 days, down from the 34 percent who responded in the affirmative a month early. And 26 percent plan to purchase a Mac desktop, down from 30 percent a month earlier.
This, the firm surmises, proves that Apple is not recession proof. I would ask, what if the numbers declined because some of the respondents JUST PURCHASED a new Mac and therefore saw no need to buy ANOTHER one in the coming months? (Tongue in cheek, but you really can read analysis any way you want. Heck, that's what makes a market!)
Morgan Stanley's Katie Huberty is a bit more of a quandary: She cut Apple's target just a week ago from $192 to $179. And now just five trading days later, she goes from $179 to $115. She was woefully short in her estimates last quarter across Macs, iPods and iPhone. And yet her call this morning is contributing to a 14 percent shelling of Apple shares. Regular reader Robert O'Neil tells me her report seems "random at best and doesn't seem rational on her part."
Here now, some of your emails about all this so far:
Jon writes in, after having witnessed another mob scene at his local Apple store in Oakbrook Center Mall in Illinois this weekend: "When apple is trading at $200+, the negative analysts will have all sorts of rationalizations for their downgrades, but we'll know they were just flat our wrong. Unfortunately they can do a lot of damage in the meanwhile."
Peter asks in an email with the subject line: "Did Jim Goldman actually go to college?" asking, "How am I supposed to take Jim Goldman's article seriously when you can't even get basis spelling and grammar correct?" It's a blog, not classical literature. Sometimes I get so excited that stream of thought takes over. My apologies.
Andy Zaky takes on Morgan's Huberty following a post he sent to seekingalpha.com last week, telling me: "Two downgrades in two weeks from objectively the worst Apple analyst on Wall Street. Hmmm."
Larry brings up an interesting point: "I think short sellers who have been banned from bank stocks have now moved on to RIMM, AAPL and last but not least POT."
Alberta writes, "Good article. Can you explain why other companies in this sector aren't tumbling nearly as bad as AAPL?" I can't, only to say that the market, like politics, loves to build up a star only to tear them down, just "because."
It's why I keep beating the fundamentals drum. If Apple misses, at least investors will have a concrete reason to sell. In the meantime, it's a guessing game. Unless you follow Jon from a few posts earlier who's still witnessing mob scenes inside the Apple stores at the mall.
David asks, "Analysts, smanalysts. Where were all these goofballs before the meltdown on Wall Street? They should all take a hike." Which may be exactly why they're downgrading Apple today. So they can say they warned us in case Apple does miss.
Dave says, "The analysts have proven to be generally (i.e. more times than not) useless. Fundamentals are sound. Products are sound. My local Apple store was mobbed -- as usually this weekend -- with people of all ages. Even if consumer buying for Apple products weakens, it will be temporary. At these prices the stock is a long term buy."
Fabio chimes in: "What kind of funny analysts can change their mind in a single day so much?" Hey, market conditions change! (Kidding.)
Dan thinks there's a conspiracy: "I suspect these (two analysts) may have some associates who are short Apple. These analysts are wrong and doing something like this on the day before the quarter ends seems like a conspiracy to me."
Mitch bought 3,000 shares between $50 and $80 last year and now: "The wife is freaking out over the market! After days upon days of telling her we need to ride this out, this AM she had enough and basically put a gun to my head." Mitch has sold 1,000 shares today, including some he bought at $141 not long ago. He's concerned he'll miss the ride back up. Mitch, I can't give stock advice. It's how I keep my job, and my friends. All I know is that losses aren't real until they're realized. Only you know your own personal situation and I can't advise you. Even with the downgrades today, I don't see anyone on the Street with a "sell," and absent that, patience might serve you well. But it's not worth risking the marriage -- or a gun at your head. And hey, if you miss the ride back north, she'll spend a lifetime apologizing to you! What's that worth?!?
Troy comes at this from the other perspective: "Thank you for your blog this morning...After reading all of these downgrades and watching the stock drop, I was included to get out. But thanks to your calm and objective reporting which always seems to put things in proper perspective, I did not panic and have decided to add to my position, little by little. You just can't deny the fact that his company has been firing on all cylinders. We may see a larger sector slowdown, but I can't believe Apple's time as a tech leader is suddenly up. It just doesn't make sense."
That's a pretty good way to end this. For now.
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