WSJ: Recession Not Baked-In to Apple Share Price

23 JUNE 2022 - Earlier this week, Wedbush analyst Daniel Ives made the case that tech stocks are oversold and that a mild recession is already baked-in Apple shares at their current levels. “No it isn’t,” indicates a piece from The Wall Street Journal (Via Apple News+), citing the thinking of Bernstein Research analyst Toni Sacconaghi. The Journal’s Dan Gallagher sounds bearish on the market in general, making him particularly so on Apple. The way he sees it, the current price of Apple shares:

…reflects a steadfast belief that gadget buyers won’t be hanging up on the iPhone—still Apple’s most dominant product—or the company’s other devices in the event of a sharp global economic downturn that a growing number of experts and chief executives are projecting. The company has indeed managed through recessions in the past, though the past two happened to coincide with product launches that ultimately remade the company once focused on niche computers. Apple launched its first iPod digital music player in late 2001 in the midst of the recession sparked by the first dot-com bust, while the first iPhone launched in 2007 right before the global financial crisis ushered in the last major recession.

This sounds like a job for a mixed-reality headset, but what do I know? As for the other stuff Apple’s doing, “what other stuff?” seems to be his rebuttal. Quoting the post again:

…hardware still accounts for more than 80% of [Apple’s] total revenue. Even the services side has a large transactional component from categories such as App Store downloads. Toni Sacconaghi of Bernstein estimates that less than 10% of Apple’s revenue is recurring—the least among big tech hardware makers.

“Still just an iPhone company” definitely sounds like somebody who’s been reading Sacconaghi. Not that they are wrong, necessarily. As Yogi Berra might say, “we won’t know until we know.”