Mike Abramsky: Apple vs. RIM revisited
We got a call Friday from Mike Abramsky who wanted to set the record straight — and crow just a little bit.
Last February we chided Abramsky, an analyst at RBC Capital Markets, for seemingly wrong-headed calls on Apple (AAPL) and Research in Motion (RIMM).
Three weeks earlier he had lowered his price target for Apple from $140 to $70 a share — below all the other analysts' — and raised his RIM target from $45 to $75.
But as luck would have it, Apple ended up climbing 27.5% to just under $100 a share, and RIM, after issuing an earnings warning, fell 14.5% in one day, to below $50 a share.
Those were short-term movements, however, and Abramsky — who has since raised his target on both stocks (Apple to $165, RIM to $90) — was calling to point out that while Apple's shares have risen an impressive 51% since Jan. 1, RIM's have done even better, climbing 81% for the year.
"We were wrong about our Apple valuation," he admits. "But we were right about which stock would outperform the other."
Abramsky these days is bullish on both companies, and had interesting things to say about what each has in store for this summer and fall.
RIM, he says, has at least a dozen smartphones in the pipeline — mostly extensions of its current lineup reconfigured for release with new carriers.
For example, there are new versions of the BlackBerry Bold and Flip coming to Verizon (VZN), and a version of the Curve 8900, which had a good run with T-Mobile (DT), coming to AT&T (T).
But there's also the product code-named Pluto that's half touchscreen and half keyboard, a phone with a slide-out keyboard, and a new version of the touchscreen Storm that has solved the first edition's awkward typing problems, according to carriers who have seen it.
Apple, by contrast, is sticking with its usual lean and stripped-down product line-up. Abramsky sees no more than three iPhones in Cupertino's near-term offerings:
- A "pro" iPhone with more memory, a better camera, perhaps a flash, and a host of other improvements users have called for
- A price cut on the current iPhone, to perhaps as low as $99 — which he says could significantly boost the device's global market share
- A smaller, entry level "nano" iPhone, but not before next year
"It's not really about Apple versus RIM," he says. "It's not a zero sum game." The two companies have "unique technology skills and focus," he says, and they appeal to different sets of users.
According to Abramsky, the BlackBerry will continue to draw "productivity centric" users who care about security, push e-mail and what he calls "purpose-driven browsing" (for example, looking up a phone number).
"Media centric" users will tend to prefer the iPhone, which Abramsky describes as "unmatched" in terms of Web browsing, iTunes integration, breadth of applications and general user experience.
Together, he says, Apple and RIM will drive the next wave of mobile handset sales — which he believes have shifted irrevocably from cellphones to smartphones — and continue to take market share from Nokia (NOK) and Motorola (MOT).
"This is almost Apple's second chance to dominate the industry," says Abramsky, who has been around long enough to remember how the Mac, once overtaken by Microsoft (MSFT) Windows, never caught up.
"Here in the mobile handset market Apple has such a strong sustainable advantage that one could argue that it will continue to dominate and gain market share."
So hats off to you, Mr. Abramsky, for owning up to your mistake, for reconsidering your valuations and for imagining markets broad enough to allow both RIM and Apple to prosper.
But for the record, in the four months since you made that Jan. 16 call on Apple, its shares, which closed at $129.19 on Friday, have actually outperformed RIM's ($73.77). See chart at right.
See also:
Apple had the foresight to exclude QWERTY keyboard from iPhone and force the multi-lingual Touch keyboards as the standard on smartphones. Now Apple is only minutes away from the 2 biggest markets in the world – China and India who are already well versed with the iPhone's Chinese and Hindi virtual keyboards, Rim's QWERTY keyboard is neither suitable for China and India, nor acceptible because the QWEETY keyboard takes out too much space and weighs too much as well as bulky.
Rim will never be acceptible in China and India.
Apple will succeed in selling billions of iPhones and iPods in China and India without any Buy1 Get1 Free blackberry kind of deals.
@James from Toronto, Ontario May 9, 2009 1:03 pm
yes, the one that literally worships the iPhone "god".
I expressed many times on PED's blog that many Apple's customers relate to it as a cult. But if there is one post that confirms my sentiment, it is yours.
Man, you need to have your head checked (and I wud not be surprised to find a tatoo of something relating to Apple Inc on your forehead..)
apple is a great company with amazing products. however, the stock can't possibly be worth 125 bucks.
Nice article PED.
Abramsky's $70 call still irks me as the most outrageous call I've seen from an analyst. Given his years in the business it was absolutely INCONCEIVABLE to me that he could make that call *while at the same time* being so optimistic on RIM. I've never been so up in arms convinced that the analyst game is rigged after learning of his target. I actually don't feel much better now that he's admitted his mistake, the 'not a zero sum game' statement he makes is precisely what makes his first call so insane, and it's not like he's a young pup that didn't know this. I'd have been fine with his call if he also downgraded RIM on a bigger call that smartphone growth was in trouble due to the economy. But, downgrading one while upgrading the other smells of something nobody wants to admit. The retraction, and especially the thoroughly bearish to thoroughly bullish flip-flop really make it appear he was pressured into the first call, and then found it so ridiculously indefensible that he pushed back because he could no longer stand looking in the mirror and seeing the glowing dunce cap on his head.
So, while this incident has completely shocked me, what bothers me more is the bigger issue. If this could happen to Abramsky, who's to say this doesn't happen all the time with all the other analysts we read and often hold great sway in the market? The probability is clear, it's very likely that many or most analysts are not giving us their views without being adapted by many undisclosed influences, and that should bother us all.
Did it ever make you wonder why unofficial analysts like Zaky and Miller can consistently determine earnings within a few pennies while the professional continues to miss by huge amounts? Do you really think they can't learn from the previous results and can continue to be so surprised? Sorry, this guys are intelligent people who could adjust their methods if accuracy was their goal. The conclusion is obvious and very difficult to credibly deny.
Let put the hyperbole aside and look at the facts. At present there is no question that the iPhone and Blackberry phones dominate their markets, however it appears that you are blindsighted by the fact that Palm's Pre is by all measures, in hardware and software, the the better devise. Granted it has yet to be tested by the masses, however one should not lose sight of the fact that the cognoscente and pundits in the wireless world have admitted to the fact that to date the Pre has lived up to all its hype. Let us forget the Anal-ysts, who are more wrong than right, and focus on the conclusion of the cognoscente and pundits who are rarely wrong. Palm has many advantages, first its OS, the WebOS, was completely designed from scratch to perform most of its tasks on the internet and not the desktop, secondly the Pre addressed almost every hardware issue that was manifested in the Smart phone world. Owing to this the Pre with its WebOS will become the fastest gun slinger in the market come this June. To militate this the Pre will be capable of working on Sprints 4G network, essentially putting the final nail in ATT and VZ coffin with regard to who has the fastest and best Smart phone on the market.
If you say twice as many silly things as others, you are bound to be right at least half of the time.
Right about which stock outperformed the other? You wrongly downgraded one (which caused it to drop) and upgraded the other? And you brag about that?
Mr Abramsky seems to forget these are real people out here that are effected by his misguided downgrades.
I always find it amusing how Apple fans get all wound up about those who don't speak highly of Apple.
Half the web blogs are Apple paid hacks this place some of the worst.
June better be that fantastic as I have yet to see anything above and beyond in OS 3.0 unless your a developer (or Apple) looking to squeezing more money out of users.
Perhaps it's time again to ask how much business Abramsky's parent corporation – Royal Bank of Canada – does for RIM.
Do Canadian banks have Chinese Walls?
http://www.articlearchives.com/banking-finance/financial-markets-investing/853669-1.html
http://www.istockanalyst.com/article/viewiStockNews/articleid/2753825
iPhone is the god of mobile devices cloaked in modest form and overlooked thus under-understood by the mobs who mistakenly took the iPhone as merely another item on the shelves instead of what the iPhone truly is…. an immortal among mortals. Rim cannot be rightfully be placed by the iPhone's side. To do so is like claiming Jesus to be just a man, or Allah to be just another god. People should study the merits of the iPhone instead of blindly assuming that Rim in the same class as Apple, which is simply wrong. Learn to know how truly great the iPhone is. Monetary value system does gross injustice to Apple here. People actually think nothing wrong of Rim's desperate Buy1 Get1 Free campaign trying to divert Apple customers to Rim. Business is just so dirty…
Mike Abramsky is obviously retarded. People don't care if an iPhone has a flash. They care if it supports MMS so they can share photos with others!
RIMM is ahead because their phone is a better product. It has better exchange support, far superior battery life and the full keyboard requires no learning curve (vs. the type and correct apple keyboard). I think the iPhone 3.0 release (eta June) will make things a little more competitive.
Also, ignoring phones for a moment the upcoming snow leopard OSX release (eta June) should be pretty stellar (or at least there will be some hype driven stock inflation pre-release).
Abramsky is wrong about the second chance to dominate a market. It's a third chance because Apple already dominated the MP3 and digital music market (their actual second chance). Historic accuracy in these matters defines an analyst's worth.
Abramsky represents the kind of mindset and acumen that is needed to be an analyst in the financial world. I think I can be a better and more successful analyst than him at any given point. His incompetency and fickleness is a matter of concern and I pity RBC Capital for employing such a flip-flop.
Very interesting that Mike Abramsky, or any analyst for that matter, would reach out to set the record straight. But I give him credit for doing so and for acknowledging that he made the wrong call with his $70 AAPL price prediction.
We all have our biases, and I still can't help but suspect that part of the motivation behind Mike's (RBC's) AAPL downgrade and virtually simultaneous RIMM upgrade, came from RBC's investment banking conflicts.
Thanks for writing this update column and for posting it here.
If anyone is curious, RBC's Research in Motion conflicts are outlined here >
http://idannyb.wordpress.com/2009/03/04/opinion-does-rbc-have-a-leaky-chinese-wall/
http://idannyb.wordpress.com/2009/04/03/will-mike-abramsky-raise-his-apple-aapl-70-price-target/
Excerpt from iPhonAsia: "on January 18, 2009 the Royal Bank of Canada’s Mike Abramsky placed a sell recommendation on Apple with a $70 price target. AAPL at that point in time was trading at $82.83. Soon after this RBC downgrade, Apple posted Q1 2009 earnings. Apple handily beat Street analysts’ consensus. As of today (2/6/09), Apple (AAPL) is hovering near $100 per share … some 30 points above RBC’s target price."
The only reason Mike has changed his tune is because RIMM doesn't look like it's as near to falling off the cliff as it did, otherwise he would still be snubbing Apple as a defensive move to protect RIMM's share price as illogical as that is. But he lost respect with his unconvincing attacks on Apple. Now this is Mike's opportunity to get back some cred (not with me), by owning up to a mistake which traditionally is seen as admirable, the problem is that his "mistake" was intentional for the before mentioned reasons. Unfortunately for him his veiled favoritism shines through, which is why he will never have street cred.
I enjoy Abramsky's selective memory and charting.
He made his calls around January 20th – not January 1st. Straight up, Apple has outperformed RIM in that time period – not the other way around. On top of that, Apple has demolished Abramsky's call.
If only I could revise my buying and selling to achieve the best results the way that analysts get to revise their history, I'd be rich! I'd like to see the journalists call these guys out for what they are – overrated mouthpieces and cheerleaders that stink at what they do.
It is amazing how Mike Abramsky, an "analyst" has been wrong. Measuring purchasing patterns in Apple stores were telling sales were going well. Just the iPhone accounting practice is driving mechanically increasing profits.
Mike Abramsky is either a crook or an incompetent.
In both cases, he should be fired.
I would ask Abramsky whether he's seen fit to compensate the money losing suckers who took his earlier advice.
People would be good to start recognizing that Mike Abramsky's boss, Brbara Stymiest, sits on the board of directors and Research in Motion.
Now, I'm not saying that RIM isn't a strong competitor in it's markets or that it doesn't have good products, but the connection between RIM and RBC makes any analysis from Abramsky or other RBC analysts for RIM or it's competitors appear tainted and a clear conflict of interest.
Clearly, he is not the right analyst to be looking at Apple. He can't see beyond the iPhone into the other products Apple produces and market segments in which it competes.
I would ask Abramsky a few questions: 1) How much is he compensated by RIMM? 2) How much RIMM stock does he and his family own? His comments appear biased and driven by anything other than reality. With all the manipulations in the financial community, I would hope that some Federal Agency investigate these opinions which tend to be more geared to manipulating the public.
I heard a rumor that RIM is possibly coming out with a "SportsBerry"
any comment