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.
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.)
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.
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.
Fool contributor Adam Levine-Weinberg owns shares of Apple and BlackBerry. Adam Levine-Weinberg is also long January 2015 $390 calls on Apple and long January 2014 $13 calls on BlackBerry. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.