After being on the spotlight for latching on to his pessimism over Apple stock, even following strong quarterly results, famed bear Rod Hall at Goldman Sachs threw in the towel and changed his position on AAPL from sell to neutral. Last week, he gave an interview to CNBC and further elaborated on his decision (see video below).
The Apple Maven takes a closer look at this bear’s journey from highly skeptical to timidly optimistic about Apple shares.
Read more from the Apple Maven: Apple Stock: One Bear Throws In The Towel
iPhone at the center of the bear case
At the core of Goldman Sachs’ sell rating on Apple stock was the Cupertino company’s challenges at meeting iPhone sales growth metrics going forward. Rod Hall explained it:
“Apple continues to show strong execution, but we see fundamentals more likely to disappoint in 2021 as the long-anticipated 5G iPhone fails to meet optimistic consensus expectations and services revenue growth slows.”
To be fair, Apple’s most recent financial results had been far from exhilarating ahead of Goldman’s stock rating upgrade. The Cupertino company’s main revenue generator, the iPhone, had produced timid results in 2020, making some wonder if smartphone sales would disappoint at the start of the 5G cycle.
The plateauing in smartphone sales preceded the pandemic year. Based on data from third party-research companies Gartner and Strategy Analytics, 187 million iPhones were sold in 2019, fewer than the 217 million of 2018. And from 2019 to 2020, there was an unprecedented decrease in iPhone revenues: from $142 billion to $138 billion last year.
Therefore, and based on recent trends, Rod Hall’s bearishness towards the iPhone seemed reasonably justifiable. What had been missing to tip Apple stock over, in the analyst’s view, was a negative catalyst. He believed that the COVID-19 pandemic could be it.
Read more from the Apple Maven: Apple Stock Higher After WWDC Week: Key Drivers
When Goldman Sachs fell off the horse
Goldman’s rating change on AAPL came in April, after the Cupertino company crushed expectations and released a blowout earnings report. Fiscal second…