Apple 2.0

Covering the business that Steve Jobs built

Let's revisit Ed Zabitsky's $270 per share Apple price target

March 7, 2013: 8:38 AM ET

Was CNBC's favorite Apple bear prescient when he told clients to sell Apple in Jan. 2012?

Zabitsky copy

Zabitsky

Zabitsky

FORTUNE -- I've received eight e-mails in the past two days from a reader named Greg Bates who thinks I really ought to take another look at Ed Zabitsky, now that Apple (AAPL) is trading in the low 400s.

You may recall that Zabitsky, who runs a one-man boutique in Toronto called ACI Research, got more than his 15 minutes of fame in 2012 after he set a $270 price target on Apple when shares were trading for $450. That earned him six minutes of face time on CNBC and press coverage in Bloomberg, Forbes, Slate and the New York Times, to name just a few.

I was pretty harsh on Zabitsky last year, especially when he reiterated his $270 Apple price target through two parabolic rallies -- first to $644, then to over $700. Among my Zabitsky hits:

I thought I'd sworn off the Zabitsky beat after that last one. It felt like I was feeding a troll. Or beating a masochist. So I resisted Bates' idea -- until he dug up a story published Monday in the Epoch Times under the headline:

Apple Shares on Decline: Analyst's 2012 Sell Call Justified
Zabitsky redeemed as Apple shares trade at 52-week low

The piece cites some of my harsher remarks and then offers this quote from Zabitsky:

"I was right last year. I've been right over the last year, that's all you can say."

Really?

Let's look at the chart I posted above. The red line represents Zabitsky's $270 price target. The green area above is how wrong he's been for the past 14 months. He's less wrong today than he was last September, but that doesn't make him smart.

Is it possible that he will eventually be proved right?

Anything is possible, I suppose. But let me put it this way: As of last quarter, Apple was holding $137.1 billion in cash and marketable securities, or about $146 per share. When you back that out of Wednesday's closing price $425.66, you get a stock that's selling for $279.66 ex-cash.

In other words, Zabitsky's $270 price target gives a company the Street expects will generate revenues of roughly $183 billion in 2013 a value ex-cash of less than $10.

Or, to put at it another way, Zabitsky's 2-year price target means that he believes in Jan. 2014 Apple will be selling ex-cash for $270 minus $146, or $124 per share -- assuming Apple cash hoard does't grow a penny in the next 10 months.

To give Zabitsky his due, it's true that if you'd followed his advice and shorted Apple in September or December, you would have made out like a bandit. But it's also true that if you'd shorted Apple as he suggested in January or April 2012, you'd probably be too broke by September to be playing Apple one way or another.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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