“The only thing more consistent at Apple (AAPL: $373.80, +8.88, +2.43%) than its ability to generate excitement for new products is its track record of releasing hilariously-conservative financial forecasts that it then easily blows away,” Matt Egan writes for FOXBusiness.
“Ultimately, Apple’s tendency to low-ball its guidance and analysts’ willingness to play along with the charade tends to harm shareholders who are left with an inaccurate picture of the company’s true financial standing and a stock that may be leaving value on the table,” Egan writes. “‘Apple is very secretive and close to the vest. They’re not above sending out smoke signals that are misleading,’ said a source in the investor-relations community who wished to remain anonymous. ‘A company that does that routinely — maybe that’s when they should suffer a discount.'”
Egan writes, “To be sure, Apple’s guidance strategy is not seen as illegal or even unethical. And the company is hardly alone in low-balling its forecasts. However, Apple does appear to be the highest-profile and largest company employing these tactics.”
“In any case, it’s hard to place all the blame on Apple as it’s clear the analyst community has gone along with the game. Rather than sharply ratcheting up their EPS and sales projections to account for the fact that Apple low-balls its guidance, analysts tend to hike them just moderately. That results in deceptively-low consensus estimates that the markets compare the results with,” Egan writes. “‘If analysts accept the low-balled guidance and accept the quarterly results that consistently exceed the estimates, then they’re both playing in a game of mutual self-deception,’ said Stevenson, who led the IR and communications departments of Kraft and R.J. Reynolds. “The ultimate loser is the investor who can’t count on either one of these two pieces of information.'”
Read more in the full article here.
MacDailyNews Take: By now, AAPL investors should that Oppy’s guidance is Apple’s worst-case scenario / quarterly joke and, if you want realistic guidance, skip the “professional” analysts and go straight to the likes of the Turley Mullers, Andy Zakys, Daniel Tellos, and Horace Deidus of the world.
MacDailyNews Note: Currently, the analysts’ consensus estimates call for $5.80 EPS on revenue of $24.92 billion (vs. Q310 results of $3.51 EPS on revenue of $15.70 billion). On April 20, 2011, Apple CFO Peter Oppenheimer provided the following guidance: “Looking ahead to the third fiscal quarter of 2011, we expect revenue of about $23 billion and we expect diluted earnings per share of about $5.03.”5.80 24.92