Apple Q4 earnings: Analyzing the analysts
Last week, Andy Zaky of Bullish Cross, representing a group of unpaid analysts who follow Apple (AAPL) in blogs, challenged the professionals who do it for banks and brokerage houses — and whom the bloggers claim are clueless (see Apple Q4 earnings smackdown).
So now that Apple has reported its 2008 Q4 earnings, how did the two teams do?
The results are summarized in the chart below, with estimates closest to the mark highlighted in green and the worst highlighted in orange:
What jumps out of the chart for me is how badly the pros blew the iPhone numbers: the Street consensus was off by a shocking 72%. It was here that the bloggers shone. All three came within 8% of the actual number and Turley Muller of Financial Alchemist hit it on the head with an estimate of 6.8 million.
“I was just lucky the data was good,” says Muller. “All the data — my checks with Best Buy managers, counts at Apple stores, IMEI numbers, assumed production rates — pointed to the same general number.”
Muller, it must be said, had the worst estimates for total revenue and Mac sales — overshooting actual sales of 2.611 million by 350,000 Macs. But everybody overshot Mac sales, which were hurt by weak school purchasing and customers holding out for the new notebooks Apple introduced last week. For some reason, the major sales tracking firms missed those trends. “I can no longer rely on Gartner and IDC data,” says Zaky. “They really got it wrong — or if they didn’t get a wrong, then sales overseas are collapsing.”
Because everybody over-estimated Mac sales, they also over-estimated revenue — Muller and Piper Jaffray’s Gene Munster worst of all. But in Munster’s defense, he has mastered the art of predicting iPod sales based on NPD data, and everybody who followed his lead got that number right.
Munster is also the only analyst I know who dared publish an estimate of deferred revenue, which Apple reported for the first time on Tuesday. When deferred revenue from iPhone and Apple TV sales is factored in, Apple earned a stunning $2.69 a share on sales of $11.7 billion last quarter. Munster’s estimates were $1.60 and $10.1 billion, respectively.
Two bloggers — Zaky and Deagol — ended up with with the most greens in a row, with three best-in-category squares out of six and no oranges.
The prize for the most embarrassing call goes to Barklay’s Ben Reitzes for missing the iPhone number by more than 3 million units, followed closely by Merrill Lynch’s Jeff Fidacaro and Bernstein’s Tony Sacconaghi.
Bottom line: Nobody got everything right, but considering how badly the pros misjudged iPhone sales and how close the unpaid analysts were on the other numbers, I have to give this round to the bloggers.
The best thing about the blogger-analysts is that you don’t have to pay to read their estimates — at least for now. The best places to find them on the Web are The Mac Observer’s Apple Finance Board and Investor Village’s private AAPL Sanity (registration required).
You can read our live-blog of Apple’s Q4 earnings call here or read the transcript here. If you have an hour to spare, you can hear the Web cast — which includes a rare guest appearance by Steve Jobs — at Apple’s Web site here, where it will be available for two weeks.
ex ped: Fixed.
ex ped: Right you are
ex ped: Noted
ex ped: Fixed.
Ooops. There may be a future for you as an analyst ;^)
ex ped: What can I say? It was a chart with many moving parts.
What you’re overlooking is that both deagol and Andy are basing some of their numbers on other people’s work. Take for ample iPods. Munster has a knack for correctly predicting how many iPods are sold and both deagol and Andy are using Munster’s numbers.
There are two jobs most of us would drool to have:
1. Wall Street analyst
2. Los Angeles or Las Vegas TV Weatherman (”…and tomorrow will be sunny!” - Duh!)
These are two jobs where you can be an utterly incompetent twit, and be paid handsomely, so long as you look and sound good. In the case of Wall Street analysts, their power combined with sheer incompetence can do some serious damage. And if they are unethical, even more so.
Unlike a nurse, a teacher or a fire fighter, it’s sad to think that these non-essential people are compensated well beyond their value. Some people are so Teflon…like too many politicians…
MacBooks Selling Out Worldwide
Written on October 15, 2008 by Darrell Etherington
http://theappleblog.com/2008/10/15/macbooks-selling-out-worldwide/
Looking at the results of the chart above reconfirms my opinion of analysts.
Analysts opinions = (same as) drunken dart throwing.
They all have lousy aim.
Like drunken dart thrower, I stay away from them.
The colors green and orange are almost indistinguishable to color-blind people like me. Could you use different colors in your charts? Thanks.
For revenue, Huberty’s number is closer to the actual than Fidacaro’s
ex ped: Fixed. Thanks for the catch. It makes the bloggers look even better.
Murphy is right. Carriers are drooling over AT&T’s ability to pull subscribers from their competition. That makes the iPhone price easily sustainable - devices with that kind of pull don’t pop up every day, or even every year.
How is Munster’s $8.370b revenue forecast worse than Muller’s $8.436b?
ex ped: Right you are. Fixed in chart and text. Thanks for the catch.
Here’s a new quote to chew on from UBS:
“AAPL was downgraded to neutral from buy at UBS, even after reporting a 26% rise in profit and strong sales of its new 3G iPhone. The broker said strong cash provides downside support but there’s uncertainty ahead. Apple “should benefit from early adopters in the fiscal first quarter, but (there’s) limited visibility beyond that.” The broker added the $635 average selling price for the iPhone seems unsustainable.”
The article didn’t name the analyst. Sounds like Steve Ballmer is moonlighting for UBS.
Note that even though Mr. Fidacaro was able to closely estimate most components of Apple’s business correct; he got the most important part, earnings, quite wrong.
Surprisingly the maligned or cherished analysts were neither completely wrong nor completely right. There are no angels nor demons on Wall Street, just merely analysts with whom we may agree or disagree, but who are less than what we make of them.
Thanks for an excellent comparison chart
I think you made a mistake between Earnings (1.14B) and EPS 1.26. Also it would be good to note that if Apple wasn’t using the differed earnings for the iPhone, their EPS would have been $2.69 for Q408
ex ped: Noted.
Apple reported $1.26 EPS, not 1.14$. (They reported a profit of $1.14 billion, which is not the same)
ex ped: Fixed. Thanks.
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Silicon Valley veterans like to joke that Steve Jobs must be surrounded by a reality distortion field; if you get too close to him, you start to believe what he's saying. Thanks to the success of the iPod, the launch of the iPhone and the renewed interest in the Mac, Apple has made believers out of millions of customers - and made a lot of investors rich. But Philip Elmer-DeWitt believes that an ounce of skepticism never hurts when writing about the company. He should know. He's been covering Apple - and watching Steve Jobs operate - since 1982, first for Time Magazine, then for Business 2.0, and now for Fortune.
> ex ped: What can I say? It was a chart with many moving parts.
Understood. There was some reverse dissembly required on your part. Especially with the Muller/Alchemist (how appropriate!) data.