Apple's Up to Its Usual Tricks

Don't sweat Apple's (AAPL) "disappointing" guidance numbers; it's just Steve Jobs & Co. up to their usual tricks.

"This is typical conservative Apple guidance," said Chuck Jones, a money manager at Atlantic Trust Private Wealth Management, which has nearly $17 billion under management, including Apple shares. "The company tends to downplay expectations."

In a down market, it wouldn't hurt to rein in expectations and then exceed them--as Apple has in each of the last seven quarters, beating Wall Street estimates each time, including yesterday.

Still, company shares were trading nearly 10 percent lower after hours on the company's reduced revenue forecast for the next quarter. Jones thinks it's a mistake to sell shares just because the company lowered its guidance, though he won't go so far as to assume that Apple "bakes in" a 15 or 20 percent premium into its forecasts. Perhaps investors were merely spooked by a story yesterday in the New York Post suggesting that Jobs' health was on the wane.

Jones remains upbeat. "The Mac business is still on a tear, and the iPod has done much better than anyone was expecting," he says.

Meanwhile, the new iPhone 3G, which has been a mega-hit, will also help the company moving forward, although it could be several quarters before we begin to see that effect.

"I think everybody -- including Apple -- has been surprised by the demand for the iPhone," says Michael Obuchowski, a portfolio manager at New York-based Altanes Investments, which owns Apple.

Comments

[Julian Ivan...:]

"In a down market, it wouldn't hurt to rein in expectations and then exceed them--as Apple has in each of the last seven quarters, beating Wall Street estimates each time, including yesterday."

Actuallty its more like the last 17 quarters...

2008 Jul 22 05:45 AM

[Murphy Mac:]

What about the lazy headlines? Here's a headline from the AP:
Stocks Look to Fall After Disappointing Earnings

And from Reuters:
Wall Street Set to Fall After Flurry of Poor Results

Plenty of people bash Seeking Alpha editors, but I'd expect a little more from the big newswire players. What exactly was disappointing about the results Apple reported? Wasn't it the forecast that disappointed? How can a writer be that lazy?

2008 Jul 22 07:49 AM

[blueskyrocket:]

Apple would be crucified if they missed EPS by just 1 cent, and people wonder why they consistently guide 10% low? By Apple keeping guidance low, they are adding strength to the company stock price. They keep guiding low and outperforming, only to again have AAPL flogged again on the next guidance. Sooner or later, AAPL is going to break out and rush to $250 when iPhone 3G and its next iterations blow all forecasts away. End of my rant.
BSR

2008 Jul 26 04:38 AM