An Apple Skeptic Goes Bullish (Again)

Jefferies technology analyst Peter Misek has toned down his bullish view on Apple (NASDAQ: AAPL  ) over the past year. At this time last year, Misek had a buy rating and a $900 price target on Apple shares due to his bullish view of the (then) new iPhone 5. Today, Misek still has a buy rating on Apple, but his price target is now just $600 based on lower expectations for growth.

If only it were that simple. As it turns out, Misek has taken a much more circuitous route to this $600 price target. Between December 2012 and June 2013, Misek reduced his Apple price target no less than four times, dropping it from $900 to $405 in that brief time span, and cutting his Apple rating from buy to hold.

Then, in August, Misek raised his price target to $450. Finally, on Monday, Misek came full circle and joined the bull chorus again. He upgraded his rating on Apple to buy (again), and raised his price target to $600.

There's nothing wrong with changing your mind when the facts change. But if you change your mind as frequently as Misek has on Apple, it suggests that you are missing the forest for the trees. Investors who really want to understand Apple are well advised to tune out this Wall Street noise and focus on the basics.

Chasing the price chart
Back in March, I cited Misek as a prime example of analysts chasing Apple's price chart. In other words, as Apple stock fell from its September 2012 peak, he repeatedly revised his target price downwards -- but only after the stock had already fallen.

AAPL Chart

Apple 1-Year Price Chart. Data by YCharts.

A year ago, Misek's $900 price target was well ahead of Apple's $650 stock price. By the time he cut his target to $800 in December, the stock was already down nearly 20%. In January, when he cut his rating to hold and dropped his price target to $500, the stock had already fallen below that threshold. Other price target cuts -- and increases -- have similarly come too late to be useful for investors.

This week's move
For what it's worth, Misek's first rationale for the most recent Apple upgrade is that suppliers are being more lenient on pricing for Apple. If this is true, it would boost Apple's gross margin in the upcoming year, leading to higher profits even if sales growth remains tepid.

Second, Misek -- who has become a big fan of large-screen smartphones -- thinks the presumed "iPhone 6" will have a 4.8-inch screen. He expects this feature to drive a strong upgrade cycle. (Personally, I think that while some iPhone users would like a bigger screen, it's hard to argue that the 4-inch screen is too small, given that Apple cannot keep up with demand for the iPhone 5s.)

Reader beware
As an Apple shareholder, perhaps I should be grateful analysts like Misek are back in my camp. In fact, one of the main reasons for my bullishness -- my expectation that Apple's margins will bounce back in the coming year -- is a key factor cited in Misek's report.

Nevertheless, I can't help thinking, "With friends like these, who needs enemies?" I certainly hope Misek is right this time, but I cannot have any confidence in his conclusions in light of his past performance.

(As a side note, if Misek's history of tardy Apple calls doesn't alarm you, you can also look to his recent bullishness on BlackBerry.  Misek had a price target of $22 until this summer, and as recently as two months ago maintained a buy rating and an $18 price target on the stock. BlackBerry shares now trade for about $8.)

Foolish bottom line
While I've been picking on one particular analyst here, there is a broader point to be made. Wall Street analysts spend so much time trying to guess how stocks are going to do in the next few months that they can become inept at predicting how stocks will do over the next few years.

iPhone 5s. Source: Apple.

As an individual investor, you shouldn't be trying to predict the market's short-term performance. In fact, if you can tune out the "noise" and focus on the fundamental business drivers for companies in your portfolio, you have a good chance of beating the Street at its own game.

Last month, the lines to buy Apple's newest iPhone were as long as they have ever been. Two and a half weeks later, the iPhone 5s is still facing shipping delays of weeks or even months. That's solid evidence that Apple is still popular; customers are as eager as ever to get their hands on the company's newest products. That's all that investors really need to worry about.

Learn the real secrets about Apple
If someone asked you, "Why invest in Apple?", could you truly answer them? To be honest, few investors could. That's because Wall Street analysts and the financial press often miss the big picture in their rush to guess where Apple stock is headed next. If you want an edge on other Apple investors, be sure to check out "5 Secrets to Apple's Future" from The Motley Fool. This 100% FREE guide includes actionable advice that you can put to use right now! Just click here now for instant access!


Read/Post Comments (11) | Recommend This Article (26)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 08, 2013, at 5:52 PM, makelvin wrote:

    "...Wall Street analysts spend so much time trying to guess how stocks are going to do in the next few months that they can become inept at predicting how stocks will do over the next few years..."

    The reason why Wall Street analysts always project how the stock will perform in the next few months instead of the next few years is because they are simply incapable of making any real analysis to make any kind of prediction at all.

    What they are really trying to do is trying to make ridiculously bullish or bearish reports to persuade and influence other investors' investments and thereby trying to make it a self fulfilling prophecy. Of course such projection without any real fundamental analysis can only fool people for a short period of time and that is why their projections are always short term.

    The fact is even bullish analyst like Munster are harmful to Apple because he will unnecessary build up so much hype to a point where Apple cannot possibly meet the expectation. Then Apple stock will tumble because it failed to meet his ridiculous super hyped up expectations.

    People need to ignore both Misek and Munster or any other similar type of analysts who are interested in drawing media attention.

  • Report this Comment On October 09, 2013, at 2:01 AM, singaporenick wrote:

    Misek is typical of analysts,just more inept than most.In what other field of human endeavour can someone get paid so much for being so wrong most of the time.

    As an Apple shareholder,I am worried now that he is backing the stock,as that probably means the price will fall!

  • Report this Comment On October 09, 2013, at 2:43 AM, Mathman6577 wrote:

    I agree. Best thing to do is ignore Wall Street regarding Apple (and the Apple bashers ---unfortunately some are Foolish writers). Over the long term investors will be rewarded. Be patient.

    Good comment regarding missing the forest. He's also missing the fact that Apple may not be a "rule breaker" high growth company anymore and may be in the transition to a "rule maker" to steal a phrase from the Fool creators.

  • Report this Comment On October 09, 2013, at 6:06 PM, cmalek wrote:

    Wall Street analysts are paid to generate opinions, not to be right.

  • Report this Comment On October 09, 2013, at 6:10 PM, Iggywine wrote:

    Somewhere in my archives i have an article that was published in Forbes (or was it Fortune?) during the i-phone euphoria predicting a $1,400 price target for Apple.... so the predictions continue. Meanwhile Apple keeps on making money and developing new products. I was a late convert (at $325 per share) but still a happy one, and I continue to hold onto both the stock and my i-phone.....

  • Report this Comment On October 09, 2013, at 6:46 PM, leradron wrote:

    it remains frightening that aapl has one product that drives the vast majority of their profits. and a market share that is the result of us carrier subsidies.

  • Report this Comment On October 09, 2013, at 8:54 PM, TMFGemHunter wrote:

    @leradron: It's only really a problem if the subsidies go away, and I don't expect that to happen. If AT&T or Verizon tried to get rid of the subsidies, the other one (along w/ Sprint) would use the opening to gain market share.

    In any case, if subsidies went away, I don't think it would hurt Apple's U.S. market share that much. The more likely problem is that people would upgrade less frequently, putting a damper on industry sales.

    Adam

  • Report this Comment On October 09, 2013, at 9:35 PM, mapartha wrote:

    Sometime ago even Motley Fool predicted that Apple share price will reach $1000 before Google. Is this view still valid or do you want to change that view based on current price performance?

  • Report this Comment On October 10, 2013, at 8:56 AM, ziq wrote:

    If you're really convinced of Apple's long-term growth potential you can take advantage of the Street noise cycles--when it fails to live up to their expectations--to buy in or increase your holdings at the best possible price point. Conversely, if you're convinced most of Apple's growth days are behind it you can time the noise cycle to get out at the best price. I've read convincing arguments both ways. So I wouldn't exactly ignore the noise. It may be true that not many independent investors are going to get rich on market timing, but if done correctly once in a while it can't hurt. When you have such predictable Wall Street guru versus market behavior it helps your chances of doing it correctly.

    Personally, I'm hanging on.

  • Report this Comment On October 10, 2013, at 3:10 PM, TMFGemHunter wrote:

    @mapartha: I'm not aware of that prediction, but it's certainly possible (we writers operate independently). I think it's unlikely but not impossible for Apple to reach $1000 before Google. It's phenomenal how quickly opinion can change on a stock (Best Buy is a great example),

    In any case, I think that Apple is a better buy than Google right now. Obviously, it doesn't need to hit $1000 first to make more money for investors.

    Adam

  • Report this Comment On October 11, 2013, at 10:12 AM, mikecart1 wrote:

    Sounds like Mr. Misek is related to Mr. Jim Cramer lol. One of my lasting memories of Jim Cramer is when he showed RIM (Blackberry) stock chart that was above $50/share and how he said it was a "Must Buy! Must Buy!" and had delusional predictions of $60-$70+/share in the short-term.

    ... This was at the end of 2010 lol.

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