Jefferies lowers AAPL price target by $100... to $800$100%3B+Sees+Saturation+Slowing+iPhone+Growth+in+FY14/7934513.html

Wow, these guys are… really optimistic. Current share price is about $525. So, they are predicting an increase of over 50%…

Just got an email from Bestbuy that you can get a $50 off for an iphone 5 with 2 year contract. Although this could be Bestbuy trying to gaining marker share, this is a sign to me that iphone is no longer cool anymore compared to andriod devices, just like how you always get discount on those android devices.

I am pretty confused actually. Every investment bank is bullish Apple, and they have price targets of $700+. If the buy side had the same opinion as the sell side, then Apple stock price should be closer to those price targets. So clearly, people are not putting money where there mouths are. Is the sell side just sucking up to Apple?

Also, something I noticed - Apple options have basically zero skew. This means that OTM calls have about the same implied volatility as OTM puts. Normally, OTM puts have higher implied volatility, as people fear downside more than they love upside (somewhat of a simplification but generally true). So, if you ask me, AAPL is a good candidate for covered call if you own the stock…

I don’t think whether it is “cool” matters so much. Apple is a good company that makes good products that people really like using, to the point of where they’re willing to pay double prices for them over other hardware.

There is no other company that has such a great grasp of user preferences, design, and beauty the way Apple does, and I think Apple will do well for many years.

This is not a “buy” case for the stock though, the stock might go down 40% over the next month for all I know.

Noticed the same thing. Anybody have thoughts on this?

Yeah, it’s anchoring combined with self interest.

AAPL stock has done extremely well in recent years. It’s no doubt been a cash cow for the sell side (many, many hedge funds own the stock). It’s fun to believe that Reg FD is followed, even though it’s not, and no analyst wants to risk getting cut off during their private calls to management. I’m not saying management actively gives inside information to these analysts, but there is a kind of body language and rapport that is built up over time, and it behooves any sell side analyst to preserve a good relationship with management of the companies they follow. These analysts don’t get paid based on the performance of the stock – they get paid to act as an information conduit to the buy side. So you gotta keep the spigot open.

The anchoring part is that the stock has done really well over time and people have a hard time admitting that the party may be over. This is common with growth stocks. It’s also very common for analysts to inch their price target and estimates down over time instead of making one drastic cut (there are usually 3 waves of revisions when there is a significant trend change). I don’t know if AAPL is really in a trend change or not, but the anchoring behavior happens a lot.

I always believed that sell side research tends to be overly optimistic. But when you’re saying the stock will go from $500 to $900… I mean, come on.