Bernstein Research Bearish on Apple #InThisEconomy

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20 JUNE 2022 - “Why Bernstein’s Toni Sacconaghi is bearish on Apple in a recession,” is the headline from an Apple 3.0 post. I know what you’re thinking: “Because it’s a day that ends in ‘y’ and his name is Toni Sacconaghi.” His thinking is more reasoned than that, though he’s been so wrong for so long about Apple, it’s hard not to read hope into his words. On the other hand, a broken clock is right twice a day, and this may be Mr. Sacconaghi’s time.

Hey, maybe I should tell you what he said.

He’s worried about the economy. He likes the sort of recurring revenue seen by big business players like IBM and HP Enterprise #InThisEconomy, while transactional plays like Apple and HP leave him a bit cold at the moment. “We continue to rate DELL and HPE outperform,” wrote Sacconaghi, adding, “We see risk/reward on AAPL and HPQ as neutral to potentially negative…” Quoting his note:

Bulls argue that Apple’s premium price positioning make it less vulnerable to a recession, while bears assert that Apple over-earned last year amid the pandemic, and profits will invariably mean-revert over the next few years. We lean more towards sentiment in the latter camp, and see risk-reward on the shares as neutral to modestly negative.

But he’s been so wrong for so long about Apple. Apple 3.0’s Philip Elmer-DeWitt thinks the number of people practically addicted to buying the latest iPhone may represent more “recurring” revenue than Sacconaghi allows. One also wonders whether the analyst is seriously factoring in Apple’s Services side, including growth in ad revenue for Apple and its growing number of subscriptions.

I’m not saying Sacconaghi’s wrong. But it’s worth remembering how long he’s been so wrong about Apple. Also worth remembering - it’s a day that ends in ‘y’ and his name is Toni Sacconaghi.

Bernstein Research has a “Market Perform” or Neutral rating on Apple shares (for now, anyway). The firm’s price target on the shares is $170.