“It’s a matter of perspective and balance and true analysis. And that’s where Wall Street might not be measuring up when it comes to studying not just Apple, but indeed so many other companies and their fundamentals. Take, for example, the study released by RBC and ChangeWave, purporting to show a slowdown in Apple’s business, and therefore the reason behind the firm’s downgrade,” Jim Goldman writes for CNBC.
“But rather than just offering up the results of the survey, they beg for some deeper perspective. RBC determined that 17 percent of respondents are likely to buy a Mac laptop in the next 90 days, down from 19 percent a month earlier. And 23 percent say they were likely to buy a Mac desktop, down from 24 percent a month earlier. I don’t know about you, and I hardly want to be the one trying to accentuate the positive, but it seems those declines are very, VERY slight, and in an economy like this one, a miniscule decline for expensive products in the consumer electronics space might actually be good news,” Goldman writes.
“I understand that Apple’s slowdown, if there even is one, isn’t great. But if the slowdown–again, if there even IS one–is occurring at a far slower pace than the rest of the sector, isn’t that good? Also, it seems none of these analysts is worried about the current quarter, but what may happen some time next year. If at all. If this macro-economic slowdown continues, or deepens. Which Apple has already shown it can withstand better than most,” Goldman writes.
“More galling to me is the underlying concern that Apple won’t be able to meet gross margins expectations,” Goldman writes. “Why galling? Apple expected margins of 30 percent and said so. The Street then ratcheted up its expectations to 33 percent. Apple says 30 percent. Maintains 30 percent. Now, there’s concern on the Street that Apple won’t meet expectations. Not its own, but the Street’s! And analysts slam the company over worries that it will come up short. Come on. What kind of bizarre game is that?”
“I know Wall Street has a job to do. So does Apple. Apple routinely sandbags numbers, I believe, to lower expectations so it can ‘beat the Street’ when it releases earnings. They need to do better offering realistic guidance,” Goldman writes. “But the Street also needs to do a better job managing its own expectations, and offering meaningful analysis of the data, not just the data itself. Both sides of the story.”
Full article – recommended – here.
From what we can tell after years of doing this, Wall Street analysts can, without consequence, pretty much make up whatever they want – and do. You have to spend some serious time and look into the analysts’ individual records to find the rare good ones. Ignore the rest; they’re either incompetent or intent on trying to move share prices up or down for reasons unrelated to the actual performance and future prospects of the companies they’re supposed to be analyzing.