Apple earnings promise to be stellar, but Wall Street will focus on Apple’s guidance

“It’s earnings season my friends,” Zach Bass writes for Seeking Alpha.

“When it’s Apple’s (AAPL) turn, it will undoubtedly report outstanding numbers, blowing away all analysts estimates. I’m sure of this, through anecdotal observation: every time I visit my local Apple Store it’s packed with people and product is flying out the door,” Bass writes.

“The company is sure to announce that it trounced the its goal of 10 million iPhones shipped in 2008. Then it’ll follow that up with the introduction of new products, probably just ahead of earnings, that will once again prove that Apple is the de facto leader of tech,” Bass writes.

“But after all that, it’ll have to provide forward looking guidance,” Bass writes. “And I can tell you right now that won’t be pretty. And Apple stock price will plummet, despite its outstanding fundamentals.”

“The forward guidance is expected to have Q1 earnings of $1.74 on revenues of $11.0 billion. If Apple’s CFO, Peter Oppenheimer, reports anything south of these numbers, expect a big selloff,” Bass writes. “Actually, expect a big selloff no matter what he reports. Perhaps Apple’s earnings call will be the the catalyst for market capitulation?”

Full article here.

Here’s an idea: Stop giving hard guidance, Apple. Nobody believes Apple’s guidance anyway and all it seems to do is give those who’d like to drive down the price a nice tool to use to do so.

18 Comments

  1. I am just waiting for the selloff and the lowered stock price. My cash is just waiting there like a cat….ready to pounce and buy as much stock as I can to add to what Appl I already have.

    Apple and Steve….thank you for helping to put my kids through college.

  2. Buster, if you already have stock in them you can thank analysts and crappy economy for dropping the “college fund” or “extra cash to buy cool things fund” to a number that is probably half what it was 3 or 4 months ago

  3. MacDailyNews Take: Here’s an idea: Stop giving hard guidance, Apple. Nobody believes Apple’s guidance anyway and all it seems to do is give those who’d like to drive down the price a nice tool to use to do so.

    —————-

    Amen to that!

    I’ve been saying that for years..

  4. Zach Bass is a SHORTSELLER. He has a website and infiltrates the ranks of Mac fans masquerading as a fan himself – WHEN HE IS EVERYTHING BUT ONE ( red that as NOT!)

    He riles fans up to get the sentiment up and then shorts the stock and advises his folowing to do so. But really he feeds of this community’s positive sentiment and then it’s easy to create fear.

    He has erased feedback on his site http://www.zacharybass.com and we should all bombard him and tell him he’s a poser and probably responsible for the trend of short selling Apple which he perpetuates, encourages and has profited from and bragged endlessly about.

  5. What Apple needs to do, is just drop deferred revenue accounting for the iPhone and Touch, and just charge $5 every time new features are added to meet Sarbanes-Oxley requirements. Then they can announce that Xmas quarter guidance will be $2.13 eps on $13.5B in sales.

    That would be about 5M iPhones, adding $2.5B in sales, at a net margin of 15%, adding about $375M in profit, divided by 880M shares, adds 43 cents per share to earnings, giving you totals of about $2.13eps and $13.5B in sales.

  6. They should just not give guidance. They should say, “our sales are strong, we have a great product pipeline, but we aren’t guiding because we can’t predict where the market is going. It’s not our fault, we are doing well, it’s everyone else thats screwed in the head.”

  7. Two extra variables here in the mix. Many investors have already seen their money cut in half, and may have to sit longer term and just buy a few more shares rather than sell on guidance and lose shorterm.
    The other variable is that for the first time Apple’s lower guidance may actually be true, accurate, and necessary.
    Expect lower guidance, regardless of if it is true or not.
    The alternative is they don’t hit their numbers and it really hits the fan. They use widsom over intelligence, and expect more of the same.

  8. @ Rattymouse

    Not sure what you’re reading – I see AAPL up 6.80 for the day. Of course if you’re referring to the last few weeks then of course AAPL is down along with the rest of the market.

  9. In response to a poster above, guidance is NOT required by the SEC. It’s what Wall Street demands, because, in my opinion, analysts are too lazy to figure it out for themselves. A good example of a company that eschews giving out guidance is Berkshire Hathaway. Warren Buffet apparently despises the practice of guidance, and I completely agree with him.

    Having worked for publicly traded companies, I think guidance is a dangerous thing. Game the analysts too much, and after a while, they will start second guessing you, or setting the bar so high that your company can’t reach their “whisper numbers” (another term I absolutely despise). The result: your stock gets slammed, no matter what you say.

    Wall Street is like a meth addict: it wants to snort profits. And if you don’t feed the addict, it throws a hissy fit and either slams your stock or throws up and drives the market down 700 points. Wall Street cares nothing for you and me. It only wants your money, and leaves you to be played by its whims.

    The only way I have been able to survive in the stock market is by being very patient, selecting well-run companies for a good price, and turning off the rants of Jim Cramer. (Either he is clinically insane, or it’s a great ruse to game all of us on behalf of his hedge fund buddies. You decide.)

    What I have yet to see in all this debacle is action by the SEC to take bad regulations, or the lack of regulations to task, which permitted greedy Wall Street firms from using derivatives and swaps, as well as UNDERWRITING THEM (not just selling these toxic instruments, but taking risk on them, and in effect throwing out all risk management in the name of snorting more profits), allowing for naked short selling, which distorted the market, and for letting the fat cats at Merrill Lynch, Lehman and other firms bail out with a golden parachute, (thanks, Stan O’Neill, you frigtard) and leaving others to clean up their mess. Public executions by drawing and quartering (after having tarred and feathered them first) should be mandatory.

    So, if you ask me how I feel about guidance, please prepare to stand back. It is a symptom of all that is wrong with Wall Street. Their short-sighted arrogance and greed is helping to destroy the fabric of our economy, and as we watch, push the United States of America into the realm of an also-ran economic power, not the leading country that it has been for so many years.

    Color me appalled.

    I hope that Peter Oppenheimer takes the initiative in the next earnings call to announce earnings only, and to state that from that day forward, the company will not give out earnings guidance. It will shock the analysts, but I hope it starts a trend. Make those cork-sucking bastiches do some work for once. And since most of them can’t add (like Katie Huberty), perhaps they might want to get a job as a barista at Starbucks, if they even qualify for that.

    Am I angry? How could I not be? If you don’t feel the same way, it’s time for a gut-check.

  10. @jtc
    I meant that Apple will be helping my kids through college. The first will only start in another year and by then, according to recessions and history, we will be out of this crisis and everything should be heading back to normal. Appl is just slightly ahead of when I bought it so I haven’t lost money ….yet.

    However, I hope Apple goes even lower because, as I mentioned, I will pick it up cheap and reap the benefits in about a year!

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