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- Apple fell as much as 6% on Tuesday, the same day Goldman Sachs doubled down on its “sell” rating for the iPhone maker.
- Goldman said in a note that while Apple has rallied more than 70% since it turned bearish in April, shares could still fall 34% to its $80 price target.
- Goldman said it would get more positive on Apple if it can consistently beats earnings expectations like its mega-cap peers Microsoft and Amazon.
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Apple continued its three-day losing streak on Tuesday, the same day Goldman Sachs doubled down on its “sell” rating for the Cupertino-based iPhone maker.
Shares of Apple were down as much as 6% in Tuesday trades, and are down more than 11% since the selling began last Thursday.
Goldman admits that its downgrade of Apple to “sell” in April “hasn’t worked,” with shares rallying more than 70% since that call.
But Goldman is standing by its bearish view that Apple can plummet 34% from Friday’s close to $80.
For Goldman, the iPhone is a “very tough act to follow,” and Services and Wearables will not grow large enough to return the company to growth. Therefore, it’s still all about the iPhone for Apple.
Goldman emphasized that it's not a "permanent" bear on Apple, and in order to get more constructive on shares, it wants to see the company consistently beat analyst expectations in upcoming earnings reports, like its mega-cap peers Microsoft and Amazon.
"To be more positive, we simply would like to see a consistent string of beat and raise quarters from Apple that match the growth narrative," Goldman said.
The firm warned that another tech company that had a strong growth narrative but didn't deliver on the expected numbers was Intel. Intel's data chip growth story was supposed to make up for the declining sale of PCs in the early 2010s.
But when Intel was unable to deliver the results associated with that growth story, its stock underperformed the semiconductors index by more than 470% since 2012.
"We are not saying Intel and Apple are in any way the same company, but the disconnect between the narrative and the numbers is similar," Goldman explained.
Finally, Goldman highlighted that since 2018, analyst revenue and profit estimates for Apple's 2021 fiscal year have been steadily on the decline, even as its stock more than doubled. What's behind the surge in shares?
According to Goldman, it likely is in part driven by an increase in retail trading activity. In August, Apple ranked third for small-size stock transaction volumes.
"We believe that Apple's recent stock split is also a nod in the direction of retail investors, who have historically reacted positively to the lower absolute share price," the note said.