Wall Street's "advice" is always dubious at best, but when it comes to Apple stock price predictions, this group has an almost perfect record of failure.
I'm telling you this now because as Apple Inc. (Nasdaq: AAPL) prepares to report its Q2 earnings after the market close today (Tuesday, May 2), analysts are tripping over themselves to jack up their Apple stock price targets.
Starting in February, Wall Street has been hot for AAPL stock. According to FactSet data, 27 analysts raised their Apple stock price predictions in February, with just one lowering their price target.
In March, 31 analysts hiked their AAPL stock price targets versus just one price target reduction. In April, there were 25 increases in Apple stock price predictions and zero decreases.
That's usually a bad omen for AAPL stock...
Previous waves of price target increases have foreshadowed steep AAPL stock price declines.
Take what happened in late 2014 and early 2015, for instance. Starting in July 2013, Apple stock went on a 22-month run that produced gains of 135%. Wall Street didn't start adjusting its AAPL price targets until August 2014, more than a year later.
The analysts kept upgrading their Apple stock price predictions right on through July 2015. By that time, a decline was underway that shaved 33% off the AAPL stock price.
Now we're seeing Wall Street repeat the blunder.
But back in the early part of 2016, when investors could have used a heads up about the gains to come, Wall Street was busy lowering their Apple stock price predictions. Way to go, guys!
The current wave of upgrades follows a 12-month run in which Apple stock has soared more than 60%.
From January through June of last year, analysts were furiously downgrading AAPL. In that six-month span, there were a total of 163 Apple stock price downgrades to just one upgrade. After that, Wall Street mostly stood pat while Apple stock went on another big run.
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Any investors using these Apple price targets as a guide were ill-served indeed. They would have bought when the stock was at or near peaks and sold when AAPL was down.
And we know that analyst ratings have an impact on trading, because stocks often rise and fall on news of an upgrade or downgrade.
When it comes to Apple, investors would be better off doing the opposite most of the time.
And the biggest names on Wall Street are just as guilty - perhaps even more so - of getting Apple wrong...
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In 2015, I wrote about how Goldman Sachs Group Inc. (NYSE: GS) had a habit of adding Apple to its vaunted "conviction buy list" just before a decline and removing it ahead of a big rise in the price.
Goldman managed to miss most of the big gains in the Apple stock price from 2013 to 2015. The big bank added AAPL back to the conviction buy list in November 2015, just in time to catch most of the decline.
Goldman again removed Apple stock from the list in late April of last year - just as the stock was bottoming out and preparing to go on its most recent run.
The bad calls are so perfectly timed that it almost makes you wonder if the bank is doing it on purpose.
Meanwhile, Money Morning has urged investors to stick with Apple. When both analysts and pundits alike have given up on Apple stock, our experts have urged readers to buy.
Money Morning Capital Wave Strategist Shah Gilani went on FOX Business' "Varney & Co." in June 2013 - when Apple stock was bottoming and had few defenders - and explained why he was bullish on AAPL.
In May of last year, when Apple stock had slipped to $90 and Wall Street had little good to say, we told investors to buy AAPL.
"To the financial press right now, Apple stock is a pure falling knife," Money Morning Director of Technology & Venture Capital Michael A. Robinson said at the time. "Make no mistake: This is the long-term bargain of the year."
And then in July of last year, Money Morning Chief Investment Strategist Keith Fitz-Gerald appeared on FOX Business' "Varney & Co." to reiterate his Apple stock price target of $200 when it was trading at just $103 and the Wall Street consensus target was just $121.95.
"I think the whiners are out in left field," Fitz-Gerald told host Stuart Varney. "They say Apple's got too much cash, Apple doesn't understand its products. I think Apple understands exactly what it's doing and they know exactly where they're going."
Yesterday (Monday), AAPL stock closed at about $146.58. And Wall Street's one-year price target? $148.96.
The Bottom Line: Apple analysts have a herd mentality, and they're usually running in the wrong direction. For investors, it's best to ignore Wall Street's short-sighted AAPL stock predictions and instead take a long-term view, as we've done here at Money Morning. And we still believe that Apple is a long-term buy.
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