Why Apple is so routinely underestimated by so many

“Last year, the level of stupidity surrounding Apple was best exemplified by Haunted Empire, the calamitously bad book that tried to make the ‘Tim Cook’s company is doomed’ meme mainstream. Yesterday, Apple announced the most profitable quarter in the history of the business world — of which the other four companies in the top five are oil magnates,” Rene Ritchie writes for iMore. “So, beyond market manipulation and negative attention seeking, what makes otherwise rational, intelligent analysts and journalists experience such a continued, collective blindspot when it comes to Apple’s prospects?”

It’s difficult to overstate just how absurd this is, but here’s my best attempt: last quarter Apple’s revenue was downright decimated by the strengthening U.S. dollar; currency fluctuations reduced Apple’s revenue by 5% – a cool $3.73 billion dollars. That, though, is more than Google made in profit last quarter ($2.83 billion). Apple lost more money to currency fluctuations than Google makes in a quarter. And yet it’s Google that is feared, and Apple that is feared for. — Ben Thompson, writing for Stratechery

“Ben chalks the endless underestimations up to bad assumptions — that markets are monolithic, that consumers care more about specs and price than they do experience, and that when Apple says all they want to do is make great products, it’s not given credence,” Ritchie writes. “It seems insane, but it’s really not that dissimilar to a certain kind of gambling mentality. Some people see Apple as betting on the same thing quarter after quarter, year after year, and they figure Apple’s luck just has to run out. The more Apple wins, the more they believe the odds stack against Apple, and the more likely they think it is the company has to lose — and soon. Every time Apple wins, they not only expect the loss to be inevitable next time, they want it to be. The problem is, Apple isn’t betting. They’re investing.”

Read more in the full article here.

[Thanks to MacDailyNews Reader “Dan K.” for the heads up.]

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39 Comments

  1. I think the point is that Apple does not suck up to the market the way other companies do.
    So analysts are not going to promote stocks because there is noting in it for them.
    What I fear is that the mutual funds I own make bad decisions on investments based on stock hype (Netflix, Amazon) and I will be left holding the bag when the market finally accepts they are useless.

  2. If anyone runs across an analyst who has the integrity to say, “You know, I just don’t understand how Apple works. Maybe you’d better stop listening to my recommendations on this stock. And I’ll let Tim Cook and the Board run the company and stop giving them advice,” please post it here. I’ll be checking back every so often…

  3. Goes to prove that Apple is still and always will be the Proud Underdog to that prevailing moronic logic and mindset. That greedy, parasitical and narrow minded demographic that thrives and feeds on Fear Uncertainty and Doubt.

    Proud to be an underdog that reigns supreme!

  4. Typical “analysts” know the industry. Therefore, they expect Apple to conform to industry norms. Apple does NOT conform. Apple plays by different set of rules, and in many cases, does not even play the same game. Therefore, such “analysts” are often very wrong about Apple.

    When I read some of the predictions by these so-called “experts” in the media, I have to laugh. I don’t know the overall industry that well, but I do know Apple…

  5. I’m beginning to think that maybe Apple’s greatest asset may be something that almost never gets discussed: Apple University, which was formed by Jobs to sustain the culture at Apple that he had created – The Apple Way of doing things. Perhaps it has successfully done that (and more most likely). You don’t get the head of Yale’s school of business to just up and move to Apple for no good reason.

  6. All I know is some of these analysts must be really costing their clients an awful lot of money. I don’t know if they’re doing it because they’re crooks or just stupid. They’re always yelling, “Don’t buy Apple or Sell Apple” but I don’t know what they’re telling their clients to buy. Most of the market has taken quite a beating over the last year and Apple continues to shine. It’s like analysts are taking away their clients only chance to make some relatively decent gains. Compare any blue chip tech stock to Apple over the past year and Apple easily tops them all in combined share gains and dividends. Apple appears to have a very good Return On Investment.

    When people start saying things like Apple is going to run out of luck, I’d have to consider that a matter of poor judgment. I’m sure there must be some luck involved but I see running out of luck being due to a company making a string of rather poor decisions. Apple appears to make more good decisions than bad decisions so it isn’t likely Apple will falter that badly, but one can never predict the future.

  7. Apple makes great products at a fair price coupled with persuasive marketing, a fantastic retail experience and superb customer service. But most of all, their stuff works and they don’t try to fsck-over their customers for an unearned buck..because they know the customer can always go elsewhere to spend their dollars/yen/pounds/euros/dinars, etc. (see previous Marriott hotel debate.)

    That’s the way Apple has always done business, and after that many years, an equity of trust builds that is the most valuable possession of any company.

    1. Don’t leave out sex appeal—Steve Jobs insisted upon it.

      At the Apple store, standing by oneself before a humble altar, the iPhone appears as a thing of surpassing beauty, superbly engineered for touch and vision, beguiling you, intriguing you, creating a desire for contact. The artifact is smooth and comforting in your hand, inviting exploration. You become playful, lured by colourful icons to bravely try new things, and experience the breathless thrill of discovery. You smile involuntarily, recalling the incandescence of your youthful self.

      Then you get out your pocketbook, and buy the thing. You can’t wait to get it home.

  8. as an ex employee of tiffany i can tell you that lots of people get the same thing there at crazy prices that they could get elsewhere .They also get the blue box with the one pull bow and a smile from that special girl who gets bragging rights that her husband or boyfriend loved her enough to throw money away with both hands to make her happy . Having been a jeweler there i can tell you that many perfectly ok items have been rejected by Tiffany’s qa department (quality assurance) because they want whatever is in that box to be absolutely perfect . there are people who appreciate design perfection and there are many stores on 5th Ave but Tiffany does not compete with them it is the gold standard all other aspire to .Apple is in the same class the apex it does not compete for market discerning customers seek it out .once you have had the veuve clicquot you can’t drink Cooks anymore (it’s just the way it is )

    1. I don’t subscribe to the notion that Apple’s success is primarily based on any snob-appeal, though it is a small factor with small minds [see Citizen X, Nevermark, Cocoa Boy or Melvin for examples]
      To the contrary of “people can get the same thing there at crazy prices that they could get elsewhere,” you CANNOT get what Apple produces elsewhere at any price.

        1. Maybe people perceive it as snobbery. I know personally I tell people who ask me for help with their Windows machines, “Get a real computer and you won’t need any help.” I guess that could be taken as being snobbish, just simply the truth to me.

          1. I find that question really awkward anymore, and tell people the same thing.

            After getting rid of all but one Windows machine (for high end GPU computing, I only use it for one application) I am not going back to fixing Windows installations for anyone.

            If Apple shipped a Mac Pro that could take several GPUs, nVidia GPUs, and allowed for GPU upgrades, I would be very happy to get that. The new Mac Pro is very well designed, but impractical for some of us. I would be so happy to have no Windows PCs.

            1. ..or after 30 years of hearing, “I think there’s something wrong with my registry, I think I may have a virus or something.” I like to ask, “Do you know why they call it Windows?”

              “Why?”

              “Because that’s where you want throw the fscking POS out of.”

            2. Exactly, the registry is perhaps of the worst design bug ever. It violates every programming rule to mix tons of information from unrelated modules in one place. To make that the standard for application information is madness.

              I need to frequently install and uninstall lots of tools, exactly the kind of thing that destabilizes the registry. No end of headaches.

              Once I clicked cancel during an uninstall. Turns out that button should NEVER be pushed. No “transaction safety” mechanism at all in the uninstaller. The app was left half uninstalled in a state that could neither be uninstalled or installed again.

              It is insane that Microsoft still uses the broken registry to this day. Apple would never have done that – they took great care with their Mac OS libraries and resources from 1.0.

  9. I think it is even more basic then that: How can you sell $74 BILLION worth of stuff with such a limited product line?

    Apple’s product line.
    1) 4 phones 6, 6plus, 5s, 5c
    2) 2 laptops Air, Pro
    3) 3 Desktops Mini, iMac, Pro
    4) 2 tablets Mini, Air
    5) some other stuff like 2 iPods, Apple TV, and Airports.
    6) iTunes, App Store, Apple Pay

    That isn’t a lot of stuff to generate 74B in 90 days, but the key is very simple: THE PRODUCTS WORK AS THEY SHOULD AND THEY WORK TOGETHER with each other and other manufacturers’ stuff when they have to. And, they are of high quality and last a long time.

    That is why Apple raked in $74 billion.

    It isn’t that hard.

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