Apple Is Misunderstood By Both Analysts And The Media

Oct.29.12 | About: Apple Inc. (AAPL)

Frankly, I'm frustrated with the ineptitude. I'm not a technology writer -- my expertise lies in volatility products and derivatives. But it has come to the point where someone needs to call out the hackery being disseminated by not only analysts, who seem to have no clue of how to estimate earnings, but also by the mainstream media, who don't understand even the most basic parts of Apple's (NASDAQ:AAPL) press releases and guidance.

Quick ponderance here: What would analysts do without Apple's charitable sandbagged guidance patterns? Scary thought.

Ok, here is a typical comment by an analyst, Bill Shope of Goldman Sachs:

"Nevertheless, the relatively lackluster EPS performance and the gross margin guidance add some incremental concerns."

He's kidding, right? Here is the unbiased fact: Apple's EPS grew by 23% in a quarter where sales of core products slowed due to a refresh cycle. Lackluster is not an appropriate term to describe this quarter.

Here's a good one from the MSM:

Apple Slashes Holiday Estimates

Apple (NAS: AAPL) has reduced its guidance for its upcoming 1Q 2013, the company revealed in its press release announcing 4Q 2012 results. The iPhone and iPad purveyor now expects a significantly lower net profit figure of $11.75 in the upcoming quarter.

Huh? I didn't know that Apple had already given estimates for the December quarter. That's because it hadn't until Thursday. It doesn't guide for the year, nor does it guide two quarters ahead. Therefore, this omnipresent headline is patently wrong. This is widepread MSM confusion (do a Google search for "Apple lowers guidance" -- it is truly widespread) as to who is giving estimates -- Apple, or the analysts who are consistently way off target.

When confronting a writer that made this typical mistake, it was admitted to and corrected. Yet for readers, it's too late, the damage is already done. This sort of error occurs all the time in the financial media:

Hi Scott,

Thanks for your e-mail. Yes, you're right -- I didn't quite write it correctly. I just updated it to reflect that nuance.

Thanks for the correction + for reading,


On Sun, Oct 28, 2012 at 3:58 PM, <> wrote:

Story: Apple earnings: misses estimates, slashes guidance (

Apple did not slash it's guidance. Their guidance came in below analyst expectations. Apple does not give guidance beyond the next quarter, nor do they give annual guidance.

Ok back to analysts. Witness this gem by Chris Whitmore of DB:

"iPad units were light at 14M (vs. DB at 18M) although this was largely factored into expectation following the iPad event earlier this week."

Apparently Chris missed the conference call. Tim Cook explained this very simply twice, in the July call and again Thursday:

" we had talked about in the July call, the June quarter contained 1.2 million increase in channel inventory and so the actual sell-through sequentially looks, the comparison looks very different than the our reported sell-in numbers do..."


"...a part of this reason is because K-12 heavily buys in the June quarter, K-12 doesn't buy very much in the September quarter, it becomes the Higher Ed kind of move and Higher Ed is still buying notebooks for the most part, and so there is some kind of normal seasonal that's exaggerated further when we announced the new product in March..."

One thing to keep in mind with this analyst (Chris Whitmore). He had a price target of $650 in June, $850 last week, and now $800. Apparently, no one will ever hit his target, because he moves it around more than a gypsy circus.

I could go on, but you get the point. Don't let the analysts or the headlines sway your decision-making on Apple. If you like 25% growth on the top and bottom line on a more than fair valuation, then spend a little time reading the conference call transcript. Headlines are frequently incorrect, and the analysts are only experts at being lost trying to speculate on Apple's sales and earning metrics.

By the way, the new store opened to a line today. Shocker.

Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.