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Andy Zaky  

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  • Apple's Bullish Guidance [View article]
    Sorry. Saying that we were accurate doesn't equate to saying that we are better than everyone else. If you can't see the difference, then that's my not problem.

    Not going to really get into this. The analysis is there. The evidence is there. If you want to look up my track record, it's also there in the public realm. A few searches and you will find it.
    Dec 13, 2011. 02:20 PM | Likes Like |Link to Comment
  • Apple's Bullish Guidance [View article]
    Re: Unsupported Claims

    Notice I didn't say that I was better than everyone. You did. But if you're looking for accuracy level, Fortune keeps a running tab every single quarter. A very simple Google search would do you well.
    Dec 13, 2011. 01:10 PM | Likes Like |Link to Comment
  • How To Properly Use Apple's Guidance To Accurately Forecast Earnings [View article]
    By the way, just so everyone knows, the reason I publish this material on Apple's earnings for free is because it's not where the value in Bullish Cross lies. Forecasting earnings, running valuations etc. is valueless in my opinion. That's because anyone can do it.

    The value in Bullish Cross lies in our investment strategies, our short, intermediate and long-term analysis of where Apple is headed and in our market analysis.

    This earnings nonsense barely scratches the surface of what we do at Bullish Cross. That's why I don't really care to publish this openly.

    Non-BC subscribers often-times make the mistake in thinking that's all we do. That's why we get comments like the one from bonky. But this is not what we do at the publication. Our directional analysis and our investment strategies on how to properly position is why we have 500+ members at the publication.

    We've called multiple market tops and bottoms almost perfectly, and we've nailed the overall direction of Apple in most cases. We predicted the June bottom perfectly, the July top perfectly, the move from $370 to $420 in September, the October 4 bottom and the November 25 bottom in Apple. We were also able to get ahead of big moves in Apple 1-week before they happen.

    So again. While this earnings analysis may be what we're known for here at Seeking Alpha, it's not even close to what we do. Actually, we don't even really do this type of stuff at Bullish Cross. This type of stuff is published openly.

    There are some valuation issues, however, that we don't talk about openly. Some material that is very key to understanding the long-term direction of Apple. But that's about it:
    Dec 13, 2011. 11:47 AM | Likes Like |Link to Comment
  • How To Properly Use Apple's Guidance To Accurately Forecast Earnings [View article]
    No bonky. What happened is we got multiple data points which may have suggested that things changed with Apple's guidance when it beat its own estimates by 24% in Q3. Fiscal Q4 was a reminder that this simply isn't the case. So fiscal Q3 + fiscal Q4 together make for a good overall lesson.

    Don't make assumptions about what figured into my decision making process. It wasn't my "personal bias" for Apple. I'm not some gooey-eyed investor. In fact, I've been quite bearish on Apple at different times in the past and have called for 25% sell-offs in the stock that did materialize.

    The reason I'm bullish on the stock is because the numbers speak plainly. The second that changes, I will drop Apple like a bad habit. I have before. Google the phrase "An Apple Bull Issues a Warning for May" and then go see what happened to Apple right after that.

    The point is this. You have no idea what figured into the decision by almost every analyst to hold such high estimates last quarter. There were a lot of data points arguing for such a conclusion. The growth trend supported that conclusion as did Apple's 24% beat on its revenue guidance in fiscal Q3.

    Obviously, everyone is going to think that Apple shifted to a more conservative stance after blowing out estimates. Especially given that fiscal Q4 is a strong seasonal quarter regardless of the fact that the iPhone upgrade cycle normally takes place in Q4.

    Now in hindsight was it better to be more conservative and just allow Apple to blow us out? Yes. Because then we don't have to deal with all of the lesser minds who don't understand the reasons that figured into the decision making process. Now I have to answer people who say the stupidest things like:

    'emotions are very dangerous in the investing world." No shit sherlock. Why don't you ask around and see how much "my emotions" play into my decision-making process on a daily basis. You have zero idea as to what hell you are you talking about.

    But the reasoning, data-points and basis upon which people made these decisions in fiscal Q4 were sound. It's only in the benefit of hindsight with getting fiscal Q4 on the books does it become absolutely clear that sticking to the guidance is best.

    Basically the very best analysts all held higher expectations for fiscal Q4. What does that tell you? We're talking the very best. People who regularly have the #1 estimate on the street on multiple quarters. Don't sit there and judge until you're ready to play this game yourself. It's easy to criticize when you don't have skin in the game.
    Dec 13, 2011. 11:39 AM | 2 Likes Like |Link to Comment
  • How To Properly Use Apple's Guidance To Accurately Forecast Earnings [View article]
    Last quarter you forecasted that Apple would earn $8.87 EPS but didn't give a revenue estimate because you are so pro at this right? Hopefully, you're coin-flip analysis of what Apple will earn this quarter will be closer to the mark.

    No revenue estimate? Really?
    Dec 12, 2011. 10:27 PM | 1 Like Like |Link to Comment
  • Apple's Bullish Guidance [View article]
    So far all you've done is brought it down to a personal level. What are you arguments exactly? Oh yeah that's right. You don't have any. The only response that you've had is the manner in which I deliver a simple objective message. If you want to overlook that message over the inconsequential, then be my guest.

    Again, I'm simply delivering a very objective argument. The numbers do not lie. If I'm a condescending asshole in the process, that doesn't make a solitary difference with regards to the numbers.

    That's what I mean when I say if you want to overlook the objectivity by focusing on the inconsequential, then so be it.

    A smarter investor would look at what I'm actually telling you and come up with a reasonable response. If you can't come up with a reasonable response, then you should rethink your arguments.
    Dec 12, 2011. 10:16 PM | 2 Likes Like |Link to Comment
  • How To Properly Use Apple's Guidance To Accurately Forecast Earnings [View article]
    Yeah. You are right. That's because I got away from Apple's guidance. I was, however, pretty much almost on the dot with Apple's earnings for nearly 7 years now. With the exception of last quarter.

    I noticed that this quarter you state that you believe Apple is going to earn $9.99. Let's see how that goes.
    Dec 12, 2011. 08:19 PM | 2 Likes Like |Link to Comment
  • Apple's Bullish Guidance [View article]
    Sorry this sentence should say "So to suggest that Apple's guidance is somehow more optimistic just because it guides above the street isn't a good argument EITHER." I wasn't saying this was your argument in particular. Just one argument that might be made.

    What this point is demonstrating is that it doesn't matter which angle you look at it, you cannot infer anything by looking at Apple's EPS guidance.

    When you say "Apple's outlook was 32% higher than the earnings of the previous quarter AND usually Apple doesn't give a forecast that is much higher than its previous Q4 quarter" you are looking at Apple's EPS guidance to draw that conclusion are you not?

    You are comparing Apple's EPS guidance for Q1 to its actual results in Q4 over the past 750 years.

    While you might see a connection, the point I'm trying to demonstrate to you and you're simply just not seeing given your approach is that the connection is tenuous.

    Notice the conclusion I'm drawing here is that ANY ARGUMENT that wants to extrapolate a conclusion with regards to Apple's guidance by referencing EPS, is a flawed argument. It's bound to fail.

    Apple's EPS guidance this quarter is the result of its revenue guidance is it not? Apple's revenue guidance this quarter is the result of consumers deferring iPhone 4S purchases until fiscal Q1 is it not? The unusual difference between Q4 and Q1 is the result of Apple introducing the iPhone 4S in fiscal Q1 rather than in fiscal Q4. This year, the gap between Appel's earnings Q4 and Q1 is going to be massive. Just like the gap between Apple's fiscal Q3 and fiscal Q1 of the following year is massive.

    Apple has continued to beat its own revenue guidance by 12-18%. My earnings estimates this quarter assume that Apple beats on its own revenue guidance by 13.5% when Apple can very easily beat by a larger margin given the history and given what's going on in this quarter.

    From that revenue estimate, one can ONLY reach the logical conclusion that at the lowest possible point, Apple's EPS will be above $11.00 a share. Even if you were ultra conservative with gross margin, with the tax rate, with OI&E with OpEx, such a revenue outlook assumes $11.00 at a minimum. I have $11.75 based on Apple's past history.

    What I'm trying to demonstrate to you is that your argument which does look at EPS guidance rests on faulty assumptions. Namely, that you think a drawing a comparison between how Apple has guided Q1 relative to its EPS actual in Q4 in the past means that Apple is less conservative this quarter.

    But again. That argument is referencing Apple's EPS guidance. Apple's EPS guidance is a result of its sales guidance. It's sales guidance is higher this quarter than usual because the iPhone launched in Q1 this year when it launched in Q4 every year since 2007.

    So yes. I did read the article. You simply just didn't understand the point I was making because you couldn't see the connection.

    My article suggesting yours is asinine is a perfect representation of the truth. Sorry. But I call things as I see it.

    Aside of the fact that you can't understand why Apple's EPS guidance is random, you make an argument comparing Q1 to Q4 when you can't make that comparison this year. In every single year, Apple's product cycle upgrade for the iPhone happens at the beginning of Q4. This year, it happened at the beginning of Q1. Now what happens in Q1 is that you not only get all of the holiday shopping season iPhones you get all people waiting to upgrade.

    Don't take things personally. I'm NOT attacking you. I'm attacking your article. I can care less who the author is. I'm merely poking holes in the argument presented. It could have come from my Mom or Dad. I would still make the same conclusion with regards to the material presented.

    If you take it seriously, you will come out stronger because of it. And you'll make better arguments because of it.

    I advise you to reflect on doing a top-line down approach to Apple's guidance and reflect on the notion that the iPhone upgrade cycle took place in fiscal Q4 in every other year but this year where it was introduced in fiscal Q1. Don't you see how that plays a massive role in your analysis?
    Dec 12, 2011. 08:11 PM | 1 Like Like |Link to Comment
  • Apple's Bullish Guidance [View article]
    Why would you think that Apple's guidance is more aggressive this quarter than in previous quarters. What is the basis for that conclusion? Because I see absolutely no difference in Apple's guidance pattern this quarter.

    Apple hasn't guided more aggressively than usual. In fiscal Q4, it beat its revenue guidance by the same amount as it has every other quarter.

    The point I'm making here is this. If you look at the past, Apple beats its EPS guidance by a massive range and at very random intervals that have zero to due with Apple's intentionality with its EPS guidance.

    By saying that Apple is more optimistic than usual with its EPS guidance is to suggest that you're extrapolating a conclusion based on looking at Apple's EPS guidance.

    Nothing in the evidence suggests that Apple is more optimistic with its guidance. Take a look at this chart below. Apple has guided $1 billion or more above the street on revenue in 4 out of the last 6 quarters. See this chart here:

    Since undergoing an accounting change, Apple has guided above the street in 6 out of the last 8 quarters.

    Q1 2012 = $1.6 billion above the street
    Q2 2011 = $1.4 billion above the street
    Q1 2011 = $800 million above the street
    Q4 2010 = $1 billion above the street
    Q3 2010 = $300 million above the street
    Q2 2010 = $15 million > the street
    Q1 2010 = $15 million > the street

    So to suggest that Apple's guidance is somehow more optimistic just because it guides above the street isn't a good argument.

    Moreover, nothing in the pattern of Apple beating revenue guidance by 12-18% has shifted as demonstrated in this chart here:

    This is the 2nd or 3rd article you've published now trying to make a case that Apple is more optimistic with its guidance. It's also the 2nd or 3rd article that you've published trying to extrapolate a conclusion by looking at Apple's EPS guidance. I think you really need to re-examine your methodology. You need to look at Apple's revenue guidance and take a top-line down approach to the analysis.

    I'm still waiting on a reason for why you think that Apple is more optimistic than usual this quarter.
    Dec 12, 2011. 02:37 PM | 5 Likes Like |Link to Comment
  • Apple's Bullish Guidance [View article]
    I hope you realize that analyst estimates are the lowest in a decade when compared to Apple's guidance. In fact, as you can see here analyst estimates are only 2.68% above Apple's guidance which is lower than the 5-7% we've seen over the past 10-years.
    Dec 12, 2011. 02:06 PM | 7 Likes Like |Link to Comment
  • Apple's Bullish Guidance [View article]
    Apple's EPS guidance is entirely meaningless. You cannot extrapolate anything from Apple's EPS guidance because it is a random number based on other line-items in Apple's guidance. It depends on how Apple guides for revenue, gross margin, operating expenses, OI&E and the tax rate.

    That's why you can have a scenario where Apple beats EPS guidance by 54% one quarter and then in the very next quarter it beats EPS guidance by only 26%.

    Yet, if you look at Apple's revenue guidance, the company beats its revenue guidance by the same consistent 12-18% every quarter. That's a 6% range. Moreover, Apple also provides the same level of consistency on the line items in its guidance;

    Revenue: 12-18%
    Gross Margin: Consistently beats by 250 basis points
    Operating Expenses: Consistently guides $50 million under actual results
    OI&E: Consistently guides for $15 million under actual results
    Tax Rate: Consistently guides a 200-300 basis points below, though recently that changed to in-line.

    EPS guidance, however, is based on these other line items. So trying to sit there and extrapolate anything from Apple's EPS guidance is entirely asinine. You need to start looking at Apple's other line-items. Here's a real piece on Apple's guidance:
    Dec 12, 2011. 01:52 PM | 10 Likes Like |Link to Comment
  • Apple May Have Scrapped Its Low-Ball Guidance Strategy [View article]
    Stephen -- You cannot look at Apple's EPS guidance history and then to come to a conclusion that it is becoming more conservative. The least helpful line item in Apple's guidance is Apple's EPS. There is quite literally not one line item in Apple's guidance that is less useful than EPS. Here's why.

    Apple's EPS guidance is based on a very very random variables. Variables that are not really intentionally made by Apple. Here's why.

    When Apple gives a guidance number, the number that Wall Street analysts are focusing on is Apple's revenue guidance. They want to know what is Apple going to do in terms of sales.

    That is why the entire conference call is generally dominated by questions regarding sales and not questions regarding net income. Not let me show you why there's a massive amount of randomness to Apple's EPS guidance.

    Every single number that Apple guides for is very intentional. Apple's EPS guidance, however, is the RESULT of the other line items in its guidance. Let's start with Revenue.

    Apple tends to guide revenue between 12-18% below what it actually reports. It has done so since it changed accounting practices back in Q1 2010.

    In three out of the last eight quarters (including fiscal Q4) Apple reported a revenue number that was exactly 12-13% above its guidance when it reported. Even though the company missed Wall Street expectations in fiscal Q4, it still reported a 13% revenue beat.

    Now if you look at Apple's gross margin guidance, it typically beats its own gross margin percentage guidance by 200 - 350 basis points with the vast majority of the time it ends up beating by between 200 - 250. It has done so very consistently since 2010. Last quarter Apple beat its gross margin estimate by 230 basis points.

    Then we have OpEx. With OpEx Apple tends to either beat or miss its OpEx guidance by $50 +/-. It's generally a $100 million range.

    For OI&E, it has been a typical $5m - $10m beat. And for the tax rate, it's quite simple. Apple tends to beat its tax rate guidance by between 200 - 400 basis points each quarter.

    Now let me say this. There is a very consistent seasonal trend when it comes to particular quarters. While I've given you a "range" that range isn't as wide as you might think. In fact, what tends to happen is Apple will follow the same general trend for fiscal Q1 or fiscal Q4 so that you see the same types of things happen in every fiscal Q1 or every fiscal Q4. For example, every single Q1 since 2006, Apple has tended to beat its tax rate guidance by between 0-100 basis points. That's a very very small range.

    Notice that if you know each of these line items I listed above, it results in an EPS number. That EPS number could be 40% above or 80% above Apple's guidance.

    The reason it seems so random is because in fact it is random. When Apple gives guidance to each of these line items, the EPS number is extremely dependent on what Apple guides for in gross margin or what Apple guides for in the tax rate or OI&E or OpEx.

    What you should realize is that Apple is trying to relate different ideas in its guidance on the different line items.

    So again, trying to isolate Apple's EPS guidance and then trying to extrapolate Apple's level of conservatism by looking at EPS guidance is a massive mistake.

    You need to be looking at the way Apple guides on sales. Because once you get the sales guidance, you get the rest.

    This past quarter Apple guided for $37 billion in sales. Apple has consistently beaten that revenue guidance by 12.5-18% with many quarters coming in the 12.5-13.5% range. That's because Apple internally intends to guide exactly 10% below what it will actually report.

    Your analysis above, suggests that Apple is going to come "in-line" on its sales. On what basis do you make that assumption? Apple didn't come "in-line" on sales last quarter. In fact, last quarter Apple beat its revenue guidance by a larger margin than it has in 3 out of the last 8 quarters. Apple beat on revenue by the same margin it pretty much always has.

    Unless you change your stance here, you're going to find out the hard way. Apple will likely report about $42 billion in revenue and $11.75 in EPS.

    You're $9.99 in EPS is going to get whacked. The same goes for your outside range. You need to do some deeper analysis.
    Dec 5, 2011. 03:06 AM | 2 Likes Like |Link to Comment
  • Apple May Have Scrapped Its Low-Ball Guidance Strategy [View article]
    You are so far off the mark this time, that you don't even know. You cannot even begin to fathom just how far off you are here.
    Dec 5, 2011. 02:43 AM | Likes Like |Link to Comment
  • Jim Cramer Has Reversed On Apple Because He Doesn't Understand It [View article]
    Very nice Jason. Well done. Maybe I should start defending the stock soon.
    Nov 11, 2011. 01:10 PM | 8 Likes Like |Link to Comment
  • How The Steve Jobs News Impacts Apple In The Long-Term [View article]
    Steve Jobs rest in peace.
    Oct 28, 2011. 07:52 PM | 1 Like Like |Link to Comment