“There’s something about Charlie Wolf’s approach to Apple (AAPL) that I find charmingly old school — perhaps because he’s been in the business even longer (14 years at First Boston and 15 at Needham & Co.) than I have,” Philip Elmer-DeWitt reports for Fortune.
“Most analysts seem to change their mind about Apple’s prospects every time the wind shifts; Baird Equity’s William Power, for example, has issued seven different Apple price targets in the past 12 months,” P.E.D. explains. “Wolf, by contrast, recalibrates his targets on a strict biannual schedule — once in February and again in August. And he tells you with some precision how he arrives at those targets, breaking down Apple’s line items — Trefis style — by their contribution to what he thinks the company ought to be worth.”
“In his most recent reevaluation — issued Monday — Wolf lowered his 12-month Apple price target to $710 from $750,” P.E.D. reports. “That puts him an even $100 a share over the Street’s median target (as reported by Thomson/First Call)…”
Full article, with the highlights of Wolf’s latest report, here.
Does anyone have a handy dart board?
While I don’t take a lot of stock in analyst predictions, I can at least respect Charlie Wolf’s systematic approach and discipline towards stock valuation. Of course, it is impossible to determine the merits of his predictions without understanding the details and assumptions incorporated into his models.
I am a big believer in fundamentals, which puts me at a distinct disadvantage when emotions and irrational greed drive Wall Street and “momentum” investing rules. Personally, I do not believe that Apple’s future prospects are 38% lower now than they were back in September. But that belief is also the reason that I did not sell my shares at $709.
Needham’s Charles Wolf writes in his downgrade this morning:
“…this [price target reduction] is due to increased competition, loss of market share, and overall changes in the market.”
Complete gibberish! Increased competition? Since when and from where? Market share? It’s not ABOUT market share. And then we have the vague “overall changes in the market”. Can’t you do better than that, Charlie? You’re just echoing all the other parrots.
Things change from day today. They change in our lives and they change in the lives of companies also. Every day is a new day. It’s the job of an analyst, like them or not, to evaluate the current (and future) status of a company. To say that Apple has the same prospect going forward now as it did 12 months ago is just plain silly. Competition. There is more competition for Apple now than there was 12 months ago. And much, much more than 18 months ago. And it’s ramping up every day. Like it or not. BlackBerry didn’t think it would ever have any competition either. Shit happens. I don’t know what percentage of future earnings Apple may be losing to others but it certainly is significant. We’re all waiting for the next big thing from Apple and so are the analysts. When it comes along Apple will ramp up. I personally don’t think it will ever ramp-up as it did in the good old days but it can go up again. But what goes up can go down (see September 2012) too. So don’t put all your eggs in one basket. Don’t live in denial constantly because you made a bad call on AAPL. If I was still holding Apple down from $705 last September, I’m afraid I’d just have to be honest and say I made a huge mistake. Many seem to feel the need to spin it in a different direction. I sold at $700. That’s more than $250 above where it is today. That simply can’t be considered anything but the right move. Especially now. But I see plenty of people keep trying. Buy and hold forever can be very costly. As many, many people now understand. You don’t want to sell at $700? You don’t want to sell at $650? At what point do you not realize that you’re down $100? $150? $200? Per share! It doesn’t matter where you bought in. All that matters is that you’re down from $705. That’s the math. I put a lot of that profit in GOOG. I also put some of it back in AAPL puts. Those have been fantastic! Sold all of those last week. Sold GOOG too. Now waiting for a good reentry point into AAPL with some of that. But I will be very, very, very careful with AAPL because the consumers and market have many choices now. And I think the overall market is due for a pullback. Be careful out there.