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In the past three downturns, says analyst Toni Sacconaghi, Apple’s share price bottomed only after sell-side EPS estimates had bottomed.

From a note to clients that landed on my desktop Wednesday:

Before this most recent swoon, Apple’s stock had materially underperformed the market only three times within the last decade: (1) the iPhone 5 cycle from late 2012 to 2013; (2) the iPhone 6S cycle in early 2016; and (3) the first half of the iPhone X cycle. That said, we would note that the current pullback has been the most abrupt in Apple’s history.

We see three key lessons from these prior pullbacks: (1) Apple’s stock performance has been highly correlated to next-12-month EPS estimates; (2) in down-cycles, the stock is typically anticipatory of estimate declines; and (3) perhaps most importantly, Apple’s stock price has historically bottomed only once sell-side EPS estimates have bottomed.

So where does that leave us now? On the one hand, AAPL has seen an unprecedently steep decline, suggesting a good amount of “bad news” might already be priced in, and the stock is now trading close to its 5-year average P/FE. On the other hand, sell-side estimates have only been revised downwards by -0.8% so far, and history suggests that the stock is unlikely to inflect until estimates stop coming down. Moreover, Apple’s valuation on a FCF basis remains elevated vs. history.

Maintains Market-Perform rating and $210 price target. 

My take: Sacconaghi is standing pat, but I don’t think we’ve heard the last of the adjustments.

Cue the chart: