Apple’s Brobdingnagian size clouds market; analysts choose to exclude Apple from S&P 500 forecasts

“In analyzing U.S. corporate earnings and stock-market trends, apples-to-apples comparisons may now require tossing out the Apple,” Jonathan Cheng and Brendan Intindola report for The Wall Street Journal.

“Apple Inc.’s success selling consumer gadgets has pushed its share price above $500, cementing its place as the U.S.’s largest company, with a market capitalization of $475 billion,” Cheng and Intindola report. “But its gargantuan size is making it difficult for Wall Street to get a big-picture view of the earnings and margins for other American corporations.”

Cheng and Intindola report, “As a result, some equity analysts are cutting Apple out of the frame—and finding a dimmer outlook for the broader market.”

Read more in the full article here.

17 Comments

    1. Apple is the “most valuable” company, based on market cap. It is not the “largest” company. There many companies with higher revenue, more employees, more property, or however you want to define “large.”

      However, I believe Apple is now the most valuable company in the world.

        1. $8 trillion! It will be a while before Apple gets there… maybe two or three years. 😉

          Until then, I guess Apple will have to settle for being the most valuable publicly-traded company in the world.

  1. What goes around, comes around.

    The last application of Chauvenet’s criterion to AAPL was for being so far below the curve, now it’s because AAPL is too far above. YeeHaw! 😎

  2. It’s easy. The rest of the market is underperforming. They have mountains of debt, stagnant sales, and relatively little net income. Retail sales per square foot are laughable and in many cases, people are actively striving to buy less of their crap (auto industry, oil industry, ConAgra, etc, etc, etc). For this we over pay the executive suite and begrudge sharing the income from productivity improvements with the workers responsible for them.

    The stock market is yet another Apple victim, because Apple sets the bar so high in everything it does.

  3. It’s similar to Apple’s significant (positive) affect on the overall PC industry “growth” picture, but taken to the next level. Take Apple out, and the outlook dims substantially.

  4. its gargantuan size is making it difficult for Wall Street to get a big-picture view of the earnings and margins for other American corporations

    Such is the extraordinary nature of AAPL and the crap state of most other US corporations. You’d think the others would notice that actual factual INNOVATION is how you grow your market. But that’s apparently too difficult for most of the rest of the industry. What the frack is their problem?! Oh I know: Laziness and self-destructive management. Get with the vision kids!

  5. Since a classic quote about Wayne Gretzky intrigued Steve Jobs, I proffer another Gretzkyesque analogy…

    This is similar to what would happen in hockey pools in the 80s, when Gretzky’s scoring numbers were so far ahead of any other NHL player, he would be deemed ineligible in the interests of fairness.

  6. Why not drop other large cap companies from the index like Exxon or IBM? What happens if they do very well? Should they be dropped from the index? Dropping AAPL from the calculations when it is such a huge influence on so many other industries seems ignorant beyond all comprehension.

    How about the companies that are doing very poorly, should they be dropped from the index?

    1. It isn’t really ignorant. The point is, when looking at the market and averaging numbers that include Apple’s, you may get a very incorrect picture about the current health of the top 500 companies and the economy in general. As krquet said below, Apple seems to be the one responsible for the large part of those positive numbers; if you leave Apple (just ONE single company) out, those numbers suddenly drop.

      Imagine a class of 10 kids. Graded on the scale of 1 through 5, their average score is 3. However, when you look at the scores, you see that one kid has a 5, and all others are 2. So, a more realistic picture of the skill level of that class would appear if you were to take the outlier (the lone excellent student) and average out the remaining barely satisfactory ones.

  7. From Tyler Cowen’s MarginalRevolution:

    [block quote]

    ” Courtesy of Ajay Makan and Dan McCrum at the FT, Barclays Capital estimates that based on reporting thus far earnings growth for S&P 500 companies was 7 percent in Q4. But if you strip out Apple, that plummets to 2.9 percent.

    One company, in other words, is responsible for most of the earnings growth among the large cap firms in the index.

    (Pulls out Albert Hirschman for re-read…)

    [/q]

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