Are analysts responsible for AAPL decline?

By , Jan 25, 2013

apple money

So… Exxon passed Apple to reclaim the title of the World’s Most Valuable Corporation. But how much did Wall Street’s prognosticators have to do with Apple’s drop in value following its earnings report earlier this week?

While investors realize the company is facing stiff competition and potentially lower profits, a number of financial observers were way off in the predictions ahead of Wednesday results. Indeed, while Apple reported $54 billion in fourth-quarter revenue, analysts had forecast between $51.7 billion and $65.69 billion.

According to Fortune, some analysts were up to 17 percent wrong, while some well-known Wall Street Apple watchers came within 3 percent of the iPhone maker’s final numbers. Partially as a result of such wildly-varying forecasts, Apple is changing the way to releases its revenue guidance…

“The company didn’t have a bad quarter,” Fortune’s Philip Elmer-DeWitt writes.

In fact, it posted its best quarter ever… But the stock market is an expectations game and Apple is expected to blow past analysts’ expectations, not miss them.

So how did the 68 analysts Elmer-DeWitt do in projecting Wednesday’s outcome?

aapl-stock-drop

Avi Silver of CLSA had the best showing forecasting Apple revenue, missing the mark by just 0.37 percent off the fourth-quarter number. Sterne Agee’s Shaw Wu was the overall winner, his forecasts only 3.9 percent off.

By comparison, many of the analysts used to Apple blowing the doors off its guidance figures performed badly. Here’s a snapshot of DeWitt’s analysis of Apple analysts.

AAPL analyst review 20130125

Asymco’s Horace Dediu and Andy Zaky of Bullish Cross landed in the cellar. Meanwhile, Traderhood’s Nicolae Mihalache was overly optimistic in earnings, revenue and iPhone sales, according to Fortune.

Also, Jim Kelleher of Argus Research undershot both Apple’s revenue and iPad sales.

To help prevent such future departures from reality, Apple reportedly is changing how it releases its guidance before quarterly reports.

Instead of issuing just one “conservative” figure – which analysts presume will always be vastly lower than the final figures, the company will release a guidance range, letting analysts come to their own forecasts.

Here’s the outspoken Jim Cramer on AAPL.


For those not in the know, Cramer is a well-known and stock market manipulation veteran (your video proof is right here).

At the end of the day, reality must eventually set in. The days when Apple had the smartphone market practically to itself is gone. So are the huge sales and revenue figures which came as consumers adopted smartphones.

Now that much of North America and Europe have smartphones, the focus is turning to emerging countries, such as China. Not only does Apple now have Samsung to contend with, but the company must also learn how to produce the same quality products but at lower prices.

iPad, iPad mini, iPhone 5 (white, Minimally Minimall 001)

Ironically, while many observers felt the introduction of the iPhone 5 and the iPad mini would compress Apple’s luxurious gross margins, the consumer technology giant surprised analysts, announcing a 38.6 percent gross margin.

Analysts had expected Apple to report a gross margin between 37.5 and 38.5 percent. However, among the talk of “Apple’s toast,” this stat was hardly mentioned.

 

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  • Mohammad Ridwan

    Of Course..

  • Ahmadjoon

    Apple has to do a thing because all of Apple lovers are now going to android qnd win because of iOS 6 wifi problems

  • Al

    Absolutely… But analyst job is to analyze.. But it’s becoming a trend to see Apple fail, as if the analyst have some sort of vendetta against apple

  • http://twitter.com/piyushr21 Piyush

    trolls are increasing day by day in this blog site

    • http://www.facebook.com/zacksloane Zachary Sloane

      Holy shit! I know right! Seems like this site used to be pretty free from trolls…

    • ExRoot

      With all the intelligent comments regarding this article this is your post?

      Troll definition: A person who provokes others (chiefly on the Internet) for their own personal amusement or to cause disruption.

      Perhaps in this instance you are the ‘Troll’.

      • http://twitter.com/piyushr21 Piyush

        ohh grt an another troll ;)

  • ExRoot

    Have any of you stop to think that perhaps investors are feeling this cannot continue to climb. How high can stocks go. Samsung and other companies are coming out on the market with some really great phones & idevices. Perhaps a lot of these investors are actually iPhone iPad owners that see that Apple is not really making any more advancement and perhaps things are not going to get better for Apple as they begin to lose market share. Apple is not the only game in town and perhap investors are treating them that way. If you’ve made a lot of money from apple stock maybe now is the time to get out.

    • http://twitter.com/sivkai Siv

      Spot on.

    • Lordthree

      Idiocy. Look at amazon, ms, and google. The markets just broken cause of asshats like Munster.

  • http://twitter.com/doubleaa25 Adham

    Definitely the Analysts who caused this. All I hear after Apple announces an amazing quarter is that the Analysts are panicking and selling stocks because it did not meet their predictions.

    An Analyst’s job is to analyze. Take what they say with a grain of salt. When you see results that are still record-breaking, that is what’s important.

  • http://www.facebook.com/joe.jonsen Joe Jonsen

    greed… apple is rich as hell and doing very very will but its never enough..

  • http://www.facebook.com/zacksloane Zachary Sloane

    Don’t forget there may be some manipulation here. The over play the stock causing it to fall, then buy it back at a heavily reduced price as investor sentiment returns.

  • 4p0c4lyps3

    Most certainly seems tht analysts have an enormous impact.

  • JerseyD

    That is how the stock market works. Investors put in captial expecting a company to perform good. If a company performs above projections the stock climbs higher. If it under performs what analysts projected then the price drops.

    You could say analysts are to blame but at the end of the day stock prices directly correlate with a companies performance. If analysts didn’t predict better numbers for Apple than their stock wouldn’t have been as high as it was and technically it wouldn’t drop but it would still be at the same price today.

    • Lordthree

      “You could say analysts are to blame but at the end of the day stock prices directly correlate with a companies performance.”

      This is not the case and never has been. I want what you’re smoking.

    • CollegiateLad

      This might be the stupidest post of the day. If stock prices correlated with a company’s performance, Apple’s stock price would be over $1000. Did you not get the memo? Last quarter was the best ever by a tech company and one of the best for ANY company. Apple nearly sold 50 million iPhones in 3 months and had revenue of nearly $55 BILLION.

      Investors ridiculous numbers are based off Apple’s estimates – they expect Apple to outperform their guidance each quater. When Apple doesn’t, it’s considered a miss.

      The notion that Apple isnt performing is absurd. They just outperformed the entire PC industry, AGAIN.

  • SirPsycho

    Cramer said all that needs to be said. Too many people who do not know how the stock market works own too much Apple stock and it had become over valued. Add to that cheap interest rates and people borrowing money to buy more stock that needs to be sold to cover margin calls when the stock dips even a little.

    Apple stock is a bubble, just like the real estate bubble and the dot com bubble, when all the amateurs start jumping in and driving the price out of reality this is what you get.

  • Jay Mac

    It is upsetting to see the stock take a quite a dive after what was considered to be a very successful quarter. But I have to say, I am by no means aware of how the stock market works, but there were a couple things that Cramer guy said that did kinda make sense. For one, Apple now in some ways has to “awe” the people. We were in Awe when we saw the iPhone. We were in awe when we saw iOS. And we were in awe when we saw the iPad. Those have now run its course. Everyone is looking for Apple to show them something better and new. And apple really isn’t doing that. They’re improving on products little by little, which is good for them. But not so much for competition. Another thing Cramer said was that stock pile of money. I said it before on another blog, I can’t be more happy for Apple who has huge profit shares. But they aren’t doing anything with that money. Take a chance. Don’t let everything sit in the “Apple Labs”. If it doesn’t go well, ok. It’s not Apple has never failed at anything. I don’t see us rushing to PING to MobileMe anymore. And those were services that cost time and money to make. They should take a chance.

    What also doesn’t help is the combination of the media and the internet. I rarely, if ever, hear on the news about what samsung, HTC, LG or Motorola are doing in terms of their products and launches. But when there’s an Apple Keynote it’s on the news the day before and day of to tell people what was all said and launched. On top of that I was watching and they started quoting rumors to viewers as if they were actual facts! That there would be 3 iPhones and then I heard the 4.8 inch screen rumor. There’s no proof of that! And people, viewers, customers and investors and analysts taking all these rumors from our favorite Apple Blogs and claiming them as hard core facts. It’s no wonder why stock goes down. When you’re promised the world and all someone hands you is a very well crafted replica Globe, it’s no surprise things kinda take a fall.

  • http://twitter.com/sivkai Siv

    Instead of pointing the finger at analysts Ed, why don’t you examine the role Apple has played in its own downfall? Let me break it down for you, the reason for Apple’s financial woes is because: it does not innovate. It’s that simple. What does this mean? It means a smaller increase in sales from Apple and a greater increase in sales from the likes of Samsung. This leads to concern among investors, which ultimately ends in what we see now: Apple’s share price falling.

    So please, stop with fanboyism, open your eyes and take a more critical view of Apple. If you really want to be helpful, perhaps you can write an article about how Apple can innovate their products, starting with iPhone…which, since the 4, has been nothing but mediocre compared to its competition.

  • pauleebe

    Apple isn’t responsible for meeting impossible expectations set forth by random analysts. Profits CAN NOT continue growing at the rate they have been since Job’s return. They beat their own guidance, and still had massive profits and growth in new sectors.

    Plus, analysts likely have ownership of Apple stock. What better way to play the market than short a stock, release impossible guidances, watch the stock plummet, and PROFIT. Those same suckers will be buying it all up by Monday.

    It’s all corrupt, and the stock market isn’t as free market as one would be led to believe. The media, and flakey analysts have way too much control.

  • Ted Forbes

    Apple is big business gain no matter how you look at it, no matter what Apple does, it’s big, big gains. Tech, stock and copy cats. If you can’t innovate then imitate, or intimidate, LOL! Any which way you’ll make a lot of big bucks no matter what you do, no matter what Apple does. Everybody WINS!!!

  • @dongiuj

    Nope, Apple did a fine job of that by itself.