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A rare event in that cozy world


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I had to rub my eyes this morning when I saw the target price then looked up current price of AAPL to be sure:

 

https://www.cnbc.com/2019/09/13/goldman-sachs-just-dramatically-cut-its-outlook-for-apple-predicts-26percent-downside.html

 

Then Apple made a rare rebuff:

 

https://finance.yahoo.com/news/apple-says-tv-won-t-185904696.html

 

It is really rare for large brokerage to basically issue a sell rating on a mega cap and market darling. Rarely see target price below actual price too.

 

Then to see the company debate it publicly is also uncommon. I mean you see that kind of stuff with GE or when a known short seller issues a report on a small company but, this I have rarely seen.

 

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I can’t remember if Goldman was ever involved but Apple bashing in the financial media isn’t that new.  It has happened in waves, driven the stock price down like crazy, and created great buying opportunities. 

 

In the past though, the negativity was based on some legitimate concerns about the business and the question was whether things were overblown.  What is new this time is that the bear thesis is just … bad:

 

Goldman Sachs just significantly slashed its price target for Apple, predicting 26% downside for the shares because of a “material negative impact” on earnings for the accounting method the iPhone maker will use for an Apple TV+ trial.

 

“We believe that Apple plans to account for its 1-year trial for TV+ as a ~$60 discount to a combined hardware and services bundle,” wrote Goldman analyst Rod Hall, in a note.

 

“Effectively, Apple’s method of accounting moves revenue from hardware to Services even though customers do not perceive themselves to be paying for TV+. Though this might appear convenient for Apple’s services revenue line it is equally inconvenient for both apparent hardware ASPs and margins in high sales quarters like the upcoming FQ1′20 to December,” Hall added.

 

 

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It was such a stupid call by the GS analyst if TV+ was really at the center of the "26% downside" forecast (this tiny tiny tiny new thing is somehow going to affect the profits of a company making $60bn in FCF). Especially if it was about some accounting treatment rather than about actual economic value.

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It was such a stupid call by the GS analyst if TV+ was really at the center of the "26% downside" forecast (this tiny tiny tiny new thing is somehow going to affect the profits of a company making $60bn in FCF). Especially if it was about some accounting treatment rather than about actual economic value.

 

Indeed, I read is as:

 

Premise: because of this and this change Apple's income will seem lower on the books.

Conclusion: This lowers the value of Apple

 

Even if one accepts the premise, the conclusion in just ridiculous.

 

Unless they mean to conclude that the price will go down because the market will not understand the effect from the premise. But they just reported this in mainstream media ....  ???

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