“For a test case of Wall Street analysts’ perverse incentives, look no further than Apple Inc. After rising to giddy heights, the stock has been unable to catch a break lately,” Mark Hulbert writes for MarketWatch. “That is in no small part due to those incentives, which cause bad news to get incorporated into stock prices only gradually. One surprising consequence, according to researchers, is that unfavorable news tends to come in waves rather than being randomly interspersed with good news.”
“With Apple’s stock 36% lower today than its September high, some investors might argue that the current [lowered] consensus forecast is a case of closing the barn door after the horses have left,” Hulbert writes. “Unfortunately, the news is likely to get even worse, according to Michael Clement, an accounting professor at the University of Texas at Austin who has extensively studied analyst behavior. That is because a downward revision is more likely to be followed by yet another downward revision than by an upward one.”
Hulbert writes, “There are several sources of this tendency, he says. One is that analysts are slow to react to new information… But other reasons are more questionable. For example, according to Clement, analysts often are reluctant to offend a company’s management, which might retaliate by restricting their future access. Analysts also are reluctant to upset institutional clients who own big positions in a stock, and who therefore don’t want the analyst to be talking its price down. Because of these ‘powerful incentives to not get the bad news out,’ as Clement puts it, the market reacts far more quickly to unfavorable developments than do the analysts themselves. As a result, the typical analyst is more likely to follow the market than lead it.”
Read more in the full article here.
Needham’s Charles Wolf writes in his downgrade this morning:
“…this [price target reduction] is due to increased competition, loss of market share, and overall changes in the market.”
Complete gibberish! Increased competition? Since when and from where? Market share? It’s not ABOUT market share. And then we have the vague “overall changes in the market”. Can’t you do better than that, Charlie? You’re just echoing all the other parrots.
So lets see the other Bozo’s are giving their phones away 2 for one or 3 for free with a contract. They don’t spend money on R&D they just take Apples IP and tie it up in the courts around the world. In addition to their not making a good return when they sell these phones their users are cheap as shit as well and don’t buy any apps. So in short these ANAL-cyst have no clue at all. Apple making real money and real margin bad. People giving the shit away to cheap customers who never buy anything good. Got it!! makes perfect sense. Really who needs to actually sell there stuff for a decent profit when they can make it up on volume. Even better than to have a bunch of media puppets who are looking for a reason to bash Apple. This does not make sense, aside from that there are plenty of areas to bash Apple. No one has to buy an iPhone or iPad but they do. There is a reason why. Quality,support, ease of use,best apps anywhere and the most apps. In fact as a developer you can write an app and not have to make 300 different versions of it to fit on all those jellybean, icecream sandwich, boiled peanuts or whatever else Google wants to call it today. FRAG-MAN-DROID. In reality these phones are breaking at an extremely crazy rate as well and they are counting those replacements as sold not as replacement but they wont share that with you. After having 30 + Android phones at our company we have now mandated iOS only.
We are tired of the security issues, tired of viruses on phones, tired of shitty apps that look like crap versus their iOS counterparts. Is the phone neat yes. does it have a big screen yes possibly to big. However on top of everything else they a extremely error prone devices that break all the time. Big hunks of plastic and low grade components inside thrown together in haste with no desire for any future support.
So yeah Apple is doing it right in comparison. I don’t expert the so called experts to get it and I still expect most ANAL-cyst to keep on printing what serves their agenda of the day today.
If the typical analyst follows the market instead of leading it, then what’s the point of investors listening to them.
As long as there are people trash-talking Apple stock down, the share price will certainly continue to fall. For Wall Street, market share is everything when it comes to share prices. Market share comes well ahead of profits but I’m not exactly sure why. Maybe because it’s an obvious indicator of popularity.
What I don’t understand is that Wall Street has already recently seen that both Nokia and BlackBerry fell despite having major market share. Both companies fell due poor profitability. Windows netbook companies also fell due to poor profitability. It’s odd that these people forget so quickly that market share is no better a single indicator of company health than any other single indicator. There has to be a balance of things.
You have to pretty much give away a lot of junk at no profit in order to break even on the premise that you will sell some content be it apps, music, video etc. The days of giving the phone away and making you money on cheap chargers and cases is over. People want and expect more. When truth is finally told you will see that the numbers from Asian manufacturers are bogus and misleading at best if they even report numbers… as in shipped to store vs sold as new and shipped to client. its that type of BS that plays games with the numbers. if that is a key indicator that they are using to make recommendations on then it is flawed in the most pathetic of ways.
Charlie has done enough. Any more will give you a stroke.
Analyst’s reluctance to offend big institutional stock holders implies they are shorting the stock & the analysts are complying ! That would be market manipulation & a crime ! Someone might issue a lawsuit along those lines,racketeering etc. If financial laws are not prosecuted,as they are not, maybe civil/criminal laws should be used ? Rico etc.
WallStreet is becoming more like a Casino now with Floor Bosses and rigged corrupt manipulations going on with no Oversight! WHY is the SEC asleep at the wheel?
The same reason every other branch of government is dysfunctional. Money = Speech, big business owns speech in our government, therefore it owns our government. Not you, not I.
Remember kids we should be running government like a business…
The Judicial system is completely ineffectual in regards to IP and securities because of the rapid speed of the markets and the glacial speed of litigation, and even criminal law. An IP suit drags on through so many product cycles that by the time a trial takes place over the theft of Intellectual Property, the design may be obsolete, or have become such a norm that the courts are blind to its origination. The “animists” are emotional manipulator a that drive stock prices up and down based on market sentiments, which are incorporated into computer programs that pump billions of dollars out of the market with little risk through micro trading, all legally under current BS laws.
So, there are “professional” investors who “invest” based on rumors, unsubstantiated news, emotions, and feelings versus actual company fundamentals. In my opinion, these are not “investors” they are manipulators playing games with huge amounts of money without proper concern for the foundation in actual financial value of the companies involved. The companies actual, physical worth and ability to earn money seems to be totally disconnected from the stock price for these “investors”.
Possibly the majority of news outlets, including this one are ignoring the 6.1.2 debacle of severe battery drain for lots of 4s users and some 5 users?
I had absolutely no problems with my 4s battery draining. I have the latest update of the o/s and battery life seeems about the same as before: excellent!
Same here, no problems with my up-to-date 4s. If you’re REALLY having problems take it back. My money would be on you not owning a iPhone.
https://discussions.apple.com/message/21352854?ac_cid=tw123456#21352854
On the battery issue with 4s and some 5’s… Check the link above , 155 PAGES of discussion…. There’s a problem for many..
I won’t to apple store twice, did backups, restores, DFU three times setting up as new phones each time…. Did it all and same issues, MAYBE 8 hours of standby with minimal or no use….
Apple last week simply replaced my phone… It’s running 6.1.
Not 6.1.1 or 6.1.2. Works ‘normal….
For you, 6.1.2 may work fine, yet for many on that thread and others, people are having lots of issues…..
Are you syncing to a MS Exchange server?
No exchange server at all in my life….
My 4s has absolutely no battery draining problem either.
It would appear that professor Michael Clement analyses the analysts. I just hope that he has more of a clue about his subject than the analysts have about Apple.
The problem these days is that there appears to be a total disconnect between Apple the company and AAPL the casino game. I would very much prefer to invest in Apple the company and leave those with short term goals to play AAPL the casino game.
“according to Michael Clement, an accounting professor at the University of Texas at Austin who has extensively studied analyst behavior.”
Hmmm he must be a scatologist in his spare time.
What bad news? Let’s see, last quarter record profits higher than any other company in the world. iPhone is the most reliable smartphone on the planet. Sales of the iPad and Mini market share still topping the charts. Mac sales still rising compared to the falling PC sales. The only bad news is what the Anal-ists make up for themselves. And suing Apple to get more dividend payments isn’t exactly being nice to Apple’s management now is it.
It’s the hedge funds, plain and simple. They can only be thought of as “investors” in the loosest terms. Investors who only look at the future to gamble with are more or less flipping a coin or waiting for a number to come up on a roulette wheel. Pouring money into a company like Netflix would hardly be considered a sound investment. One small glitch and all those “investors” will be gone in an instant. How much money can Netflix actually earn in real terms? Very little. However these so-called investors are making far more money than the company is worth. These hedge funds are just betting on large quarterly gains.
Apple’s global smartphone market share will continue to fall and there’s nothing that Apple can do about it. As long as that’s what Wall Street places most value in then Apple shareholders don’t stand a chance of seeing any share price gains. Apple needs another large revenue stream and I don’t think new hardware is the key. The hedge funds are basically trying to make money out of thin air and it’s bad for the economy and companies that require steady investors. Apple will just have to continue on its own pace without the hedge funds pumping up the share price.
So, I’m not counting on Apple making any large share price gains due to the constant fetid winds blowing towards Apple. As long as Apple is making money I feel I can get it back through dividends especially if Apple increases them. Dividends seem to be the only reliable source of steady income for Apple shareholders. I’ll know things are going well if Apple increases the number of product sales in the course of a year while keeping profit margins intact. Comparing market share to Android devices doesn’t mean anything in terms of profitability. In theory, Apple can lose market share and still make high profits. We’ll just have to see how it plays out.
The hedge funds are basically trying to make money out of thin air
It sure would be a hell-of-a magic trick if the particularly stupid hedge funds could make any money our of AIG, that demented and customer hostile hell hole leader of our ongoing economic depression, the dicks who insisted upon a bail out then complained about it not being good enough. Investing in the AIG losers is the equivalent of believing in magical faeries turning your rotting pumpkin into a crystal carriage with four white horses. No, make that four sparkling rainbow colored unicorns.
Yeah, that could happen. Brilliant investment strategy. AIG, the new darling of the hedge funds. 😯 Sheesh.
There are no ‘analysts’ for Apple…. NO ONE can name a single person that actually ‘follows and does the analytic ‘ work on the company that ’s in the news on a regular basis… They mostly ‘make it up on the fly….. The global press are liars, mis-entrops thieves and mercenaries when it comes to Apple as a company. They ALL want it to fail.. Regardless of what is happening in reality!! Because that’s what Rupe wants… F(*) HUM !!!
Wall Street analysts are less capable than tech analysts. That is scary and people actually listen to their advice???
Apple has enough cash to buy most of their competitors. They haven’t slowed down with new gadgets. Market share has never once been an Apple measuring stick. Apple devices are the most high end you can buy and often, they still outsell the standard plastic of any other single competitor or even entire industry. It is like buying an Aston Martin or Ferrari but analyst jerks will try to persuade you to buy a Ford or Toyota instead because of greater market share.
These analysts don’t know crap yet there they are spreading junk and with not enough people checking out their statements.
Quote: The “typical analyst is more likely to follow the market than lead it.”
That is true in nearly all cases, both on the way up and on the way down. That is why contrarian investing has some merit. At the point that most analyst agree on something, they are almost certainly wrong or, at best, right for the wrong reasons.
Good point. Another thing, assuming that what is said in the article is true, did the author consider that perhaps right now while the analysts are bad-mouthing Apple, that it’s actually a good time to buy in ? That’s the logical conclusion by assuming the analysts are perpetually out of touch and constantly behind the market.
BTW, very few of these people have seemed to note that the stock has risen 50 points in the last month. Seems they may already be missing out.
After rising to giddy heights, the stock has blahblahblah.
AAPL never did reach any ‘giddy height’. Even at $700, AAPL was UNDER valued. There are plenty of old posts here at MDN pointing that out and why it was the case.
So what is AAPL at $400, or wherever the ‘Apple Bears’ are determined to manipulate its value…? A PRIME example of how a bunch of losers on Wall Street can screw over a FAR superior company, all for the purpose of parasitizing both a company and sucker investors. Damn. What a sick age.
Meanwhile, what is going on IRL? (In real life). Apple just came off their most profitable quarter in their history.
Can you reconcile the current AAPL price with their sales and profit history. No you can’t, not of you’re honest and serious. IOW, attribute $400 AAPL to Total bullshit.
I’m just sitting back laughing while waiting for reality to sink in again, an inevitable event. Watch and see. Apple continues to be the best business on the planet. 8)
Ok, that’s the biggest load of self-protectionist horse shit I’ve heard in a long time from the analyst domain.
My mother always said I’m not as stupid as I look, but do I look so stupid that this idiot actually thinks thinking people are gonna buy his gut rot?
Jeepers – give it a rest. The best thing analysts can do for Apple is shut up – freely. (Obviously that’s not going to happen because, as always, any mainstream marketeering would rather see Apple fail than win.)