Apple analyst does a U-turn, changes downgrade to upgrade
You don't see this too often.
Less than two weeks after American Technology Research's chief Apple analyst zigged when the Street zagged, downgrading Apple (AAPL) from Buy to Hold in advance of the company's Q2 earnings report — and in the face of a generally bullish consensus — Shaw Wu on Monday issued a new report that reverses his April 22 opinion and raises his price target from $175 a share to $210.
What makes the change of heart so unusual for an analyst of Wu's caliber is that he doesn't cite any major change in market conditions or Apple's performance. Instead, his report reads like a mea culpa. He writes:
"We overestimated the potential negative reaction on the quarter, concerned with high expectations, a typically conservative outlook and the extreme sell-off following December results. In hindsight, we should have maintained our BUY rating and moderated our position rather than downgrading. While AAPL shares will likely remain volatile and we may see a better entry point from here, we need to align our rating with our longer term view on fundamentals of the company."
While Wu continues to worry about what he calls a "product vacuum" and inventory draw-downs in the June quarter, he now believes that investors have already factored those concerns into the share price and are focused on what's coming in the second half of the year. Here he adds some useful specifics:
- New portable Macs in time for the back-to-school sales."Our contacts also suggest a radical redesign of MacBook and MacBook Pro, with styling closer to the new iMac and MacBook Air. While MacBook and MacBook Pro have done well, there has not been a form factor refresh since 2001-2002."
- An iPhone transition around June and July."In addition to a 3G version, our contacts indicate that the 2.5G model could see a minor casing change and lower price point closer to $299-349 vs. its $399 price today. We believe Steve Jobs will likely unveil new models at his WWDC keynote in early June."
- Accelerating growth in Mac share of the worldwide PC market. "We estimate Mac had about 3.0% share of the worldwide computer market in 2007, up from about 2.5% in 2006…. We estimate that every incremental 50bps of incremental share gain (around 1.5m units) would be $0.45-0.50 per share in earnings."
- Growth in media and entertainment."The spread of Wi-Fi, 3G cellular and future generations of wireless technologies will have a profound impact on media consumption and distribution. … With a multi-platform approach, AAPL is positioned to benefit more than any other supplier."
HW says "Mr. Wu is being manipulated more than the stock price."
He and anybody who watches network and cable TV are being manipulated. Which includes over 50% of Americans.
When it is more important to report through biased political point-of-view then to report the facts, manipulation occurs.
This guy is a genius.
Should I buy some stock in Google now that it has gone up 25% in the last 2 weeks?
Completly useless!
Analysts still have "gotten" the Apple Schtick: forecast very conservatively and overdeliver on earnings day. Has happened ever since Jobs was there.
Meh. Shows what happens when you admit you were wrong.
If I was Wu (praise god for his deference) I would be sticking to the "Apple is going to die!" theme for it is is worth.
I would be saying stuff like "You'll see! Microsoft are going to make vista half the size and three times as fast with the next upgrade, and folks will love it!"
And other completely ridiculous stuff like that.
Clearly the stock market is joke ….where on a wing and a prayer people change their minds about how a company like Apple will perform … When if you look at the number Apple's profit have been record breaking almost every quarter this year but I guess that doesn't matter rumors and gut feeling is what we go by this day's…and we wonder why the economy is bad..
Is Shaw Wu an analyst or some predicting guru with a crystal ball?
If he's an analyst, he should stick to analysis and advise customers to buy or sell according to the company's strengths or weaknesses, not try to guess what the market reaction will be to the Earnings Report that he knew would show strong results.
The market is always unpredictable. Unless you're trying to convey self-fulfilling prophecy!
And the market is finally starting to come to the realisation of what Apple Inc. really is.
That's why there's a rally going on with AAPL and that's why that rally will go on for at least 'til the year's end.
I will not be surprised if AAPL reaches GOOG price levels in 2009. But I can't say that for sure, I just can't tell where I've placed my crystal ball again!
Another Analyst saying buy AFTER the stock has gone up.
Why weren't they YELLING 'BUY! BUY! STRONG BUY!" to their money paying subscribers when Aapl was at 118 just a few months ago? It was obvious a bargain then, I bought thousands of bucks more at that point.
At least Wu admits error, where's Toni Sacconaghi?
FWIW,
I think Shaw is admirable in his admission of his mistake. Curious, I can't recall any other analyst's self-admission.
Huh, do you think we live in a near-perfect world where mistakes hardly happen or…?
OTH, I've always valued Shaw's insight because he's been right a lot more frequently than the average bear.
Why change it from "Apple analyst does a Wu-turn, changes downgrade to upgrade" I like that older title better. LOL
Well to others bashing poor Wu, he did cut it to HOLD so if you sold the stock then blame someone else 
This is ridiculous. How can somebody call an emotional reaction an analysis. All the information he is citing now was widespread knowledge before. I even wonder, how people can take seriously anithing like that about a company of Apple's size. Let me guess: some guys bought shares of AAPL on the cheap.
I think there is an error in the date for his previous opinion. The article states May 22 (which has not happened yet) and I think it meant Apr 22.
Shaw Wu on Monday issued a new report that reverses his May 22 opinion…
do you mean April 22?
At least Wu is man enough to admit his mistake though I would be pissed if I had followed his advice.
"Shaw Wu on Monday issued a new report that reverses his May 22 opinion and raises his price target from $175 a share to $210." Do you mean his April 22 opinion?
ex ped: Right you are. Fixed now. Thanks.
Mr. Wu's magic prediction aside… I'd suspect the stock to hit around $200 / share around December and then fall in January. 3G phones will probably receive wide market acceptance and new Macbook Pros may be released end of Q4.