Apple (AAPL) is notorious for one thing: giving lowered guidance to their profits and revenues. Why do they keep doing this every single quarter and end up being wrong every single quarter? Why the particularly lowered guidance this quarter?
I will answer all of these questions in one simple and quick answer: Money. Why would they lower guidance to make more money? Well, in my opinion, the people who work for Apple have no incentive to drive the price of the stock higher in the short term. In fact, their incentive is to drive the stock lower in the short term. Why? The people who work at the company are being paid in options. If you schedule your strike price for options to be set on a particular day, you are incentivized to have the stock as low as possible on that particular day. The only day that one wants the price to be high is when one sells. Are any Apple insiders selling? Very few.
In other words, and this is the main point, I that that what they are doing is driving the stock lower, essentially buying via their options plans, and then waiting for the stock to go higher to its “correct” price. Brilliant. How could you not love such a creative company?
Is it illegal or even discussed that any company would be to be conservative in forecasting? Has anybody ever been fined or investigated by the SEC to drive the price down so their options are set at a lower price? Not that I have ever heard of. Have people ever been convicted and jailed for overly hyping a stock? Not sure? Let me ask my friend in Cell 12, Mr. Skilling or the dearly departed Kenny Lay.
Is Apple in their saintliness above such trickery and shenanigans? Are they so rich they have no reason to resort to such games? Does a quick search for the term backdating of options reveal the answer? Yes.
Why all of a sudden the dramatic lowered guidance this quarter? Well, for years they have been guiding lower so no one listens unless they guide dramatically lower. If they only guided marginally lower, people would take that as a positive.
Why so many questions in this article? I dunno.
Disclosure: Author has a long position in AAPL
