Apple Q4 earnings smackdown

Apple has no control over it’s stock price. All Apple can do is run a good business, make products that satisfy customers, keep their cash reserve high and continue to grow market share.

If long-term investors understood this, it should be more than enough to keep them satisfied. Still, as a long-term investor, I never expected to own a stock that could be so volatile due to media rumors and speculation. Nor did I expect that a company could set up an accounting practice that few analysts or WS understood. That seem ridiculous to me unless this is just fanboy BS. I’m going to ignore most of this for now and just wait until the stock market and the economy in general returns to how it was the last few years.

Anyway, what difference does it make that these couple of analysts see Apple the way they think it should be seen. Their opinions or numbers doesn’t change anything for Apple or it’s stock price. As was mentioned, pumping up the numbers or guidance doesn’t help investors who invest and end up being disappointed because the high numbers don’t relate to share price gains.

The way some people talk about Apple being the greatest company going on WS, being better than X or Y company, and being recession proof, yet it doesn’t translate into anything special for an Apple investor for the short term. So it’s somewhat difficult to rationalize even being an Apple investor to make quick, easy money regardless of how great the company is.

Maybe we should just be satisfied that Apple isn’t going out of business any time soon and hopefully a year from now we might actually see Apple reach $200 a share once more. Just don’t set your expectations to Gene Munster’s lofty ramblings.

I bought at $22.50 a share several years ago and caught the split. I finally got scared and sold at $89 only to have it go up big the moment I sold. I love Apple and I’m counting on that conservative guidence to sink the stock enough to buy in again. I know the actual numbers won’t have any effect on the stock price unless they are dismal which they never are.

For once I need one of those made up rumors to kick in, say tomorrow. I don’t like the health rumors so let’s go with one where Steve Jobs quits Apple and works for Microsoft instead. That would shake up the stock enough to buy in again. .

Yes, in an otherwise deserted mall, the Apple store is always buzzing with activity. Go figure!

Actually thought the ’smackdown’ referred to the inevitable, unwarranted beating that Apple stock takes after earnings, until I read the article…

My misinterpretation makes more sense and is something, unfortunately, you can rely upon.

Even if the guidance is stellar, some sleezeball hedgefund would resuscitate the ‘Jobs is Dead’ rumor and guys like you will run it, thus tanking the stock yet again.

Can’t win…

@ Kevin

Howdy neighbor.

The reason for conservative guidance is that people would get really pissed if they did NOT meet guidance, and the law suits would fly.

And - as we enter the Great Republican Recession - there is so much uncertainty that they go closer to worst case than to best case scenarios.

Then the analysts also want to be under because they do not want to disappoint people either. If someone buys on your estimates they will be happy if the company exceeds, but really upset if the company is under. This is the game. It seems to me that Munster is the only one willing to go out on a limb with a real estimate.
IMHO

I agree with the comments that the way Steve often plays with the press (by always giving conservative guidance) help those who short than who long on AAPL. But I wonder who would sell on the news when AAPL is this low.

I always say why just let all those great analysis to whom they make all great prediction to take up Apple CEO Steve Jobs position to run the company, and allow them to experience how easy they thought to achieve all their what so call predictions/expectation or upgrade and downgrade, so that they know the actual different production process as demonstrate by Apple how to run the business, instead of sitting inside the office everyday, using the financial formulas from calculator to find out all the answers? Which lead the recent financial crises?
We have a word of saying if anyone know something just only three days ahead of time, he will be the riches guy on the planet. No need to predict what will the market condition be one or two months later.

Great comment! The Apple store at the Palisades Mall in Nanuet, NY had over 125 people in it yesterday at 5 pm. A sales person told me that that number held all day long.

Great post, I’m just not happy with labeling Zaky and others as “amateurs”. Isn’t it better to just say unpaid analysts vs paid analysts? Put the emphasis on quality regardless of the source.

The results will be great, but wall street will punish anyone the see fit. As they did in after the last 2 quarters, loosing share holders plenty.

The numbers (even Apple’s) are all guesses and extrapolations, based on incomplete data and assumptions. In any remotely sane evaluation of Apple’s performance, the differences are insignificant, and anyone who wants a “reliable” number can always add 10% to Apple’s conservative estimates. That’s what I’ve always done, and it sure beats wasting time pondering the analysts’ guesses and speculations.

if everbody knows about conservative guidance, why isn’t it already discounted

Best Article on Apple yet, Philip.

“Balanced Fair” AND informative!

What good are the ‘professional’ analysts that don’t offer estimates on Iphones, Macs, etc. Only a few AAPL analysts are worth following.

The others guide down when the stock dives, then guide up when it flies back upwards.

Does that take any skill, superior training or knowledge?

I for one choose to buck the popular belief that Apple will be beat down after earnings. Sure, it has happened the last couple of quarters, but what exactly has made sense in this market for the last month anyways???

I think the stock explodes after earnings just so more hedge funds can sell the rally and beat it down 2 days after earnings. Monday and Tuesday mixed, huge sell off by week’s end.

Forgive my amateurish thinking, but why would anyone complain that Apple’s guidance is too conservative? I thought we just lived through a second BUBBLE-burst where everyone inflated their “guidance” for real-estate values and real-estate related derivatives. So everyone still wants Apple to guide higher, inflate expectations, setting unachievable financial goals, miss the goals and be criticized?

Has anyone not heard of setting realistic goals and then work hard to achieve and surpass such goals? You do not live your life this way?

A guidance is a forward looking educated guess at what can happen in the future. One uses concrete data and what one knows to make the best estimates. One can look at Best-Case, Worst-Case and Average-Case scenarios and decide which is more likely. One does not jump on the Best-Case scenario automatically. THis is standard engineering practice.

Instead of focusing your energy on Apple guidance, focus on understanding Apple’s product strategy and decide if it is a good stock to own. If it is, own it and be happy.

please steve jobs, adopt the same tact google has in not providing forward guidance. your earnings are usually great, why sink the stock by giving conservative guidance.

Unfortunately it’s not earnings that matter it’s guidance, and that will be conservative, which will sink the stock. Until they start giving guidance that the street likes they will be on a treadmill.

Analysts shouldn’t talk about what they don’t know…

Oh geez…the Apple expectations are rising again! Then again, it really doesn’t seem to matter about how much they beat the street, the stock will get punished because they will offer very conservative guidance (as usual) — maybe even more conservative due to the slowing economy.

What a lovely cycle - crush on expectations, offer guidance that is below the analysts, and then severly beat down the stock halfway through the conference call. I would have liked the article to focus on the guidance as well since that appear to far more important to the stock price. The beat seems almost expected and with little relevance to reaction.

Analysts should offer two forms of guidance.

1) What they really think next quarter will produce, and

2)what they say Apple will give for guidance

This would make it far clearer what Apple’s guidance means and whether we should be disappointed with their numbers

Somehow, it could be in Apple’s interest to keep AAPL share price low. The reason could be to benefit long-term investors (e.g. include Apple employees who buy AAPL stocks every month). I could see that over the weekend, when the White MacBook was listed below $900 at BestBuy (come in any BestBuy store to see) even though Steve said it would be $999 (it’s still $999 at Apple stores); and I bet you that it will be $899 everywhere before the shopping season starts (Nov). I think Steve played with the press because he already knew Apple well beats the earning this quarter. It’s also to say that the wall street shouldn’t tell what Apple should do. Only believers will benefit.

Selling *2* 3G iPhones (and accessories/apps/games/etc for them) may bring more profit to Apple than selling *1* Mac. And Apple probably sold 5M more 3G iPhones this quarter than any other quarter. This number brings more profit than 2.5M Macs.

And with a lot of Macs, iPhones, iPods out there, Apple would profit from selling accessories/apps/games/music more than ever. And Apple is now opening stores and selling products all over the world (3G iPhones are available in more than 70 countries this quarter).

Not that the stock won’t be punished for fine performance, mind you…

What a perverted market!