Analyst expects Apple upside surprise with October 19th earnings

“New accounting rules are expected to push Apple’s stock even higher, as Wall Street still underestimates the profitability of the iPhone, a new report has concluded,” Neil Hughes reports for AppleInsider.

“Last week, the Financial Accounting Standards Board approved a change to the revenue reporting methods in the generally accepted accounting principles (GAAP). Under the old rules, Apple was required to spread its profits from the sale of each iPhone over the term of the carrier contract for the device, typically two years,” Hughes reports.

“In a new note to investors, Yair Reiner of Oppenheimer said that despite all of the publicity of under-reported iPhone revenue, the market still doesn’t fully realize, and that will take time. The company has reiterated its outperform rating for AAPL stock and has increased its price target to $210 per share,” Hughes reports.

“‘Incredibly, despite all the ink spilled over iPhone accounting, we think the Street continues to highly underestimate Apple’s GAAP earnings,’ Reiner said. ‘We grant this will likely become a moot point within six months, as Apple incorporates new FASB accounting rules and recognizes more iPhone sales at time of sale. But until then, Apple’s EPS will continue to surprise to the upside, even if revenue comes merely in line with Street expectations,'” Hughes reports.

Full article here.

MacDailyNews Take: What’s really incredible if that anybody can walk in off the street and become an “analyst” – and, seemingly, they often do. As far as we can tell, a high school diploma isn’t even required; all that’s required is having someone call you an “analyst.” Some of them are even self-monikered. Today, literally anybody can become an “analyst” and begin spouting whatever “analysis” they desire, and for whatever reason. This must be why the “analysts” are continually “surprised” by Apple, quarter after quarter, year after year, and still cannot get a handle on what’s happening with the company.

Here’s a wild suggestion: How about requiring some minimum accreditation in order for someone to become a so-called “analyst” of companies, so that, at the very least, we can be assured that these people understand the basics, like the difference between GAAP and non-GAAP earnings and are accounting for said differences in their so-called “analysis?” Shouldn’t we be able to hold Wall Street “analysts” to some minimum standards? When they fail to meet such standards, they get Enderle-ized and forced to become mere “pundits.” That way we know who to ignore most. TV meteorologists — another job where being popular totally and completely outweighs being able to provide accurate predictions — have to meet more requirements than Wall Street “analysts.”

Logic break has ended: We now return you to the world of Wall Street.

11 Comments

  1. Isn’t it better that they are surprised everytime and estimate lower? This makes Apple appear to be a lot better than they are.. or atleast to the idiots out there that pay attention to these analysts… might make them want to buy tons more stock 😀 thus increasing my profits 😀

  2. A classic media spin-trick. When an event goes against a particular editorial narrative, such as (gasp!) increased unemployment or decreased consumer confidence (how could that be??!), the media will almost always call it “unexpected” or position it as “unexplained” in some way.

    Generally, surprise events that support an editorial narrative are not treated as such.

    Journalism, as a set of principles, has been abandoned and replaced with bald-faced advocacy. Not a problem when the advocate is transparent about their point of view. Big problem when, as with mainstream media, passes off advocacy as principled, unbiased journalism.

  3. Sorry – meant: “Big problem when, as with mainstream media, advocacy is passed off as principled, unbiased journalism.”

    Hey MDN: a comment editing widget would be nice! ” width=”19″ height=”19″ alt=”grin” style=”border:0;” />

  4. Can you see the surprise when the “analysis” are told that Apple is selling a Mac Tablet that runs the 85,000 apps that the iPhone and iPod touch can run?

    Will they be surprised or try to deny it exists? The clueless “analysis” or village idiots!

  5. Another thing these so-called “analysts” do not analyze and consider appropriately is the effect of Apple’s cash hoard.

    Assuming Apple’s cash “in the bank” is now about $35 billion (could be more), and there are 895,820,000 shares of AAPL, that is about $40 per share. So the ongoing business operation of Apple should considered currently priced at about $140 per share, not $180 per share. That makes Apple cheap, even after the recent run up.

    Thought of another way, if Apple decided to give the entire cash hoard to current shareholders in a special dividend, AAPL should go down by about $40 per share. But it would not, because most analysts never considered the cash in their analysis in first place. In fact, AAPL would probably go UP instead, because “Hey, Apple paid a dividend – maybe they’ll do it again.”

  6. Whoa. The MDN dudes are royally peeved if they are advocating MORE bureaucratic oversight for someone. I have to agree, though. I have an English major (among other things) and I typically feel I understand more about what’s going on with Apple’s business than most of the analysts quoted here at MDN. To whom are these people accountable?

  7. The quip about meteorologists made me smile. I’ve always sneered at the “pretty face” journalists — not smart enough to become newsreaders — who get assigned the job of waffling about the weather. Meteorologists? Don’t make me laugh. A meteorologist has graduated university with a science degree and is a specialist in atmospheric physics. A weather jerk just repeats what he’s told in a phone call from the real experts. Just like a parrot.

    And my grumping doesn’t stop there. Why weather in the first place? Because it’s cheap. If I want to know about the weather,
    I can look out the window! Same with stock market comments. A serious investor who wants some facts will not get them from television,, he’ll phone his broker.

    Journalists in general are a pathetic lot, (as evidenced by constant MDN articles), with solecisms, catachreses, mispronunciation, lack of geographic knowledge and other language disasters. Weather jerks are just nearer the bottom of the barrel than most.

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