Why the bad news on Apple keeps on coming

“It’s not just your perception that Apple can’t catch a break in this unforgiving market,” Mark Hulbert writes for MarketWatch. “It really has been the case that bad news has kept coming — and coming.”

“If history is any guide, this stream of bad news is likely to continue before the outlook for Apple turns up. That’s because analyst revisions tend to come in waves. A downward revision is more likely than not to be followed by another downward revision — and vice versa,” Hulbert writes. “One widely-cited academic study found that analyst forecasts typically reflect just 66% of the information that the market itself has already taken into account.”

“One thing that this focus on analyst behavior doesn’t help us do is determine when Apple’s downward spiral will come to an end,” Hulbert writes. “But you don’t necessarily need to engage in that guessing game. Instead, watch and wait until the analyst downgrade wave begins to turn into an upgrade wave.”

Read more in the full article here.

MacDailyNews Take: Yup.

Like lemmings the so-called analysts dart in unison inside their echo chamber.MacDailyNews, November 14, 2018

19 Comments

  1. It’s not analysts and investors making the forecast upwards and downwards any more. It is simply boiled down to Apple’a failure in properly gauging the consumers’ sentiment on the street level, which is the most important thing after all. The resentment against Apple, not just pricing, but all other things that I do not have to list them all here, has reached a boiling point. People who actually pay for Apple products are revolting. They are not buying and/or updating and waiting to see if Apple would change their attitude. Apple is keenly aware of this sentiment and finally became very frightened.
    They milked their loyal customers for far too long and beyond the limit. It’s not a matter of affordability. Many people are prepared to pay the premium (and they have been doing so) if they feel the products are worth the money they pay. I am in Canada and watched a business reporter on TV openly saying that the iPhones this year are not worth the upgrading etc. They just do not want to fund Apple’s greed and arrogance. Apple is now almost a single product company (so to speak), have only less than 20% market share yet some 80% share of the profit, i.e., over pricing. They have been maintaining the revenue by maintaining a high price. When this trick was beginning to unravel, they stopped reporting unit sales number, which red-flagged analysts immediately. Just a petty move.
    Now Apple are trying to move their inventory via Amazon, which is unprecedented. The news from Japan yesterday reported that Apple started discounting iPhones fairly significantly over there. They never did that anywhere in the world in the past, but this will propagate to other countries soon. Reports from the supply chains are accurate as they were the first ones to fell the heat. I do not want to be regarded scaremongering and I am sure the stock market will correct itself, but I have been feeling this consumers revolt for the past year or so and was very alarmed. So there….

    1. Yawn…
      So, Apple is behaving like Apple. Took you long enough.
      We have been here before, where analysts open a talking shop, wait for the jitters to set in, then milk both investors and Wall Street for profits.
      And if you think you are being unfairly treated by Apple, go ahead and buy elsewhere and get truly ripped off by an insecure, update free competitor’s product where value is measured by bottom line pricing and the customer be damned. As usual, all the extra benefits of going Apple – and there are many, are disregarded, discounted and ignored by the “Apple is greedy meme”
      Your choice, but not everybody has the blinkers on.

      1. It’s kind of strange. To put it into perspective, it’s only been a couple of weeks since Apple reported earnings and the whole stock market has since fallen apart. I honestly can’t imagine why so many stocks would lose value in such a short amount of time unless all their values are artificially fabricated. How can Apple actually lose $220B in value in just a couple of weeks just because they offered conservative guidance for the next quarter? That’s only an approximate future prediction which could change if Apple takes additional measures to sell products.

        There’s just something completely amiss with the entire stock market. Apple’s current P/E is around 14, while NVidia which has lost around 45% of its value still has a P/E of 19. I keep hearing how Apple is practically the cornerstone of the stock market but yet it keeps being punished based on supply chain rumors. It’s just so stupid and makes little sense to me.

        None of the market correction means very much to me as I’m not selling any of my stocks and happily collecting dividends during this down period. Like Buffett, I’m very long-term conservative and haven’t panicked. I don’t think Apple will be dropping much further and will likely return to recent higher levels next quarter. I realize iPhone sales could be down this holiday if guidance was conservative. So, what’s everyone getting frightened about? Everyone dumping their stocks is hardly a solution. What’s the point of throwing away good dividends during a down market period?

        1. Some doubts about actual Apple’s performance and concerns about high(over) pricing, sealed component, urge to buy new equipment than repair, battery gate and everything else has been lingering for quite some time. Analysts were doubting Apple’s report, then Apple announced to stop reporting unit sales. That was the trigger and analysts were convinced that what they had been suspicious about Apple’s revenue report was right. I do not pretend to know all background but reading various reports, that was the trigger.
          Yes, it is true that tech stock overall has been down but it is actually led by Apple and getting drawn in.

      2. …but that seems to be it: choose a less secure OS that’s harder to upgrade with cheaper and more modern hardware, OR get a better OS and dependable hardware BUT get taken to the cleaners with price. I’ve used Apple forever, but I’m about done with their extreme pricing for mid-level dated equipment which seldom gets upgraded. I loathe being (practically) forced to consider a Windoze system but my options are limited.

    2. Wow the peasants are revolting I guess someone had to revive that one can’t believe you went on that long with generalisations and opinions surely paraded as facts yet refused to list any of those things that seem rather pertinent to your argument holding water. To be fair there is a core of truth in some of what you say in particular around the arrogance argument, but padding it out surreally into unsubstantiated digital fairyland really doesn’t do that justice I’m afraid.

    3. Superlative post. This stood out and says it all in a nutshell, “It is simply boiled down to Apple’a failure in properly gauging the consumers’ sentiment on the street level, which is the most important thing after all.” The last time we saw epic failure on this scale was the last presidential election and I don’t want to make this political. Simply a parallel construction example that you need to pay attention to all factors.

      Yes, the over pricing (gouging) has worked well up to now (20% market, 80% profits) but in light of Japan price reductions and Amazon selling discounted products for the first time is yet another harbinger of things to come.

      “They have been maintaining the revenue by maintaining a high price. When this trick was beginning to unravel, they stopped reporting unit sales number, which red-flagged analysts immediately.” Exactly right and this was the tipping point.

      You have covered all the bases with astute analysis and nothing more for me to add. Exception, your post should be required reading at Apple headquarters. Never too late to listen to customers, Apple…

  2. There’s an economic aspect to all of this as well. As the US greenback has appreciated against virtually every major currency (and these currencies have depreciated in response) the price in local currencies for US priced goods has also risen as well.

    If we’re talking about the iPhone XR the minimum price in Australian dollars is $AUS1229 and frankly this is way to much for what you get in return.

    On a broader front when an economy heats up it sucks funds in from overseas as they are attracted to increasing interest rates (bond yields). This in turn leads to further depreciation in non US currencies.

    Eventually a currency becomes so overvalued that falling sales will begin to slow the economy to more sustainable levels. If monetary rates are applied in a judicious and gradual manner (by the US Federal Reserve Bank) the economy will gradually slow and the currency will ease thus making US priced products cheaper again.

    There will be other factors that will eventually affect the US economy, such as companies that have borrowed at near zero rates and see their profits reduced as they have to pay off their debt at higher interest rates. There’ll be lower returns to investors and many will also be attracted to bonds yields and other interest rate based investments.

    This what a lot of people with a background in economics have been expecting from an economy that has been turbocharged and is beginning to hit capacity constraints.

    In a nutshell, whatever goes up must come down and it’s better to have it happen sooner rather than later. What we’re seeing is the beginning of this process and it should take about two years to play itself out.

    One might say that Apple overplayed it’s hand and didn’t fully understand the economic implications of it’s price rises and has been hit by a triple whammy…price increases, an appreciating currency and a resulting consumer backlash.

  3. Apple stock still has rather decent fundamentals even after the share price collapse. Why are shareholders still dumping their stock? I would figure Apple stock should level off by now. Surely, investors don’t think Apple won’t sell any iPhone or other products during this entire holiday season. I can’t imagine that happening.

    Apple is supposedly a tech stock, has a P/E of 14.5 and an EPS of 11, gives decent dividends and yet people are running scared. To me, that’s just crazy. Are better stocks that much easier to find? I don’t think so.

  4. In spite of rather a negative feeling in the past 12 months or so, don’t take me wrong. I separate the stock market situation and my love for Apple. I’ve been an Apple fan for over 30 years and I do not think it would change. But I am hoping that the recent stock downturn will finally make Apple (the current management) wake up and stop to think what was wrong, and begin to correct/modify their thinking (although I do not have much confidence in Tim Cook and his overly ambitious profit pursuing). I like Apple producing high-end products and am willing to pay the necessary premium for that. But have they not gone too far to disappoint loyal Apple customers? That’s the problem. Keep higher-end image, but please halt in-your-face challenges of “over” pricing, overly restrictive user accessibility to hardware, selling memory chips (a commodity item at commodity price) at exorbitant price (easiest profit grab), deceptive practices like battery gate, create the proprietary connections and promote overpriced cables and dongles etc etc.
    All these are coming back and biting you, which is beginning to be reflected in the stock market. Please restore the former image of the capable company rather than the bean counter, short-term profit mentality. Perhaps I have to cease….

  5. Off the chart levels of fear driven by manic disruptor Trump have triggered chain reaction flight to cash, and extraordinary market cap stocks are easy liquid targets to trigger broad mass panic selling, like 2008 this will take time to recover.

  6. Do you think if Apple dropped its prices a bit and would have continued to make products for their pro customers over the years (like the Mac Pro), would the financials be a bit better?

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