“Last week, there was a ton of concern when Apple (AAPL) reported its quarterly results. While the company beat on the top and bottom line, iPhone unit sales fell way short of estimates. Additionally, Q2 guidance was well below estimates, leading some to wonder how much impact the China Mobile (CHL) deal will really have,” Bill Maurer writes for Seeking Alpha. “Unfortunately, many positive aspects of the report were missed, because with Apple, the company has to be perfect. Anything that is not perfect is a failure in the minds of these doubters, even if there is a reasonable explanation for it. Unfortunately, Apple’s biggest problem may not have anything to do with what Apple does day in and day out.”
“I want to take a look at Apple’s estimates,” Maurer writes. “One analyst sees Apple increasing fiscal Q3 [2014] revenues by more than $10.5 billion? That’s 29.8% year-over-year growth. Does this analyst have Apple launching a ton of new products in the quarter? Even worse, the high EPS estimate has Apple increasing EPS by more than 40% year-over-year! I know that the buyback has helped, but let’s not get ahead of ourselves.”
“This is how Apple ends up issuing guidance that can trail analyst expectations,” Maurer writes. “Analysts set the bar way too high, with quite a number of estimate raises going into Apple’s report, and so the company was unable to meet [Q314 guidance] expectations.”
“There is nothing Apple can do about this problem. Analysts are going to do what they do, even if what they do is just ridiculous. Expecting Apple’s fiscal Q3 revenues to rise nearly 30% year-over-year is a good example of that,” Maurer writes. “Unfortunately for Apple, the company’s biggest problem is not something the company can solve, and that is analyst expectations. The bar has been set too high, and Apple just can’t get to what is usually an unrealistic level.”
Much more in the full article – recommended – here.
MacDailyNews Take: When your local weatherman has more accountability than Wall Street “analysts,” there’s a problem.
How about requiring financial “analysts” to be certified in some fashion? A plumber in the U.S. is required more certification than a Wall Street “analyst,” a (con) job which requires no certification at all (if you can manage to land the job, presto, you’re an “analyst!”
Further, let’s require that these now-certified analysts’ estimates fall within a realistic range of accuracy lest their certification be revoked at which time they’ll be free to return to peddling used cars.