Here's What Makes NO Sense About Goldman Sachs' Downgrade Of Apple

GlassdoorOn Tuesday, Goldman Sachs downgraded Apple by removing the stock from its exclusive “Americas Conviction Buy List.”

And this is causing tons of  confusion about how Goldman really feels about the iPhone maker.

Here’s the key excerpt from their note:

Despite our optimism on this front, we believe the stock’s outperformance over the next 12 months will be more closely tied to whether or not the company’s next product cycles can reinvigorate market share momentum and installed base growth. We are optimistic in this respect, but there is still considerable uncertainty around the timing and impact of these product refreshes (we discuss our views on this in the body of the note). Until this uncertainty is resolved, the stock’s upside potential should be more limited than we previously anticipated.

Bill Shope, Goldman’s Apple analyst, slashed his price target to $575 from $660.

So, that sounds pretty bearish.

Here’s where it gets confusing.

Apple closed at $429 on Tuesday, which means Shope sees a massive 34 per cent upside opportunity in the stock.

Tuesday afternoon, Goldman’s equity strategy team published its Monthly Chartbook, which included a list of stocks with the biggest upside opportunity (see below). To be clear, this list was based on March 28 prices and targets, which means it was before Goldman slashed its price target to $575.

Still, with a 34 per cent upside, Apple is still one of the 10 cheapest stocks in the entire market.

So, “the stock’s upside potential should be more limited,” yet it has one of the biggest upside opportunities in the whole market.


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