Apple’s services revenue guidance confuses some analysts

“Apple Inc. this month sparked confusion and frustration among analysts and investors trying to decipher the performance of the company’s services business, fanning lingering concerns about transparency at one of the world’s most closely watched companies,” Tatyana Shumsky reports for The Wall Street Journal. “The problem wasn’t the math. Instead, analysts say, it was with a seemingly backward sequence of financial disclosures from Apple, and a perceived lack of transparency that led to erroneous forecasts by some analysts who cover the company.”

“The mix-up started Jan 2, when Apple shared a sneak peek of its first-quarter services business’s performance in a letter to shareholders, projecting that it generated about $10.8 billion in revenue. That estimate was above analyst expectations,” Shumsky reports. “The letter, however, left out an important detail: Its services revenue was calculated using new revenue-recognition rules, which were put in place by standard-setters to add uniformity to how and when companies record revenues for goods and services.”

“Some analysts assumed Apple’s letter was applying the old accounting standard, which would have put the figure closer to $10.2 billion, which was below analyst expectations,” Shumsky reports. “During the company’s November earnings call, Mr. Maestri said Apple would begin reporting under the new standard starting with the first quarter of fiscal 2019. The disclosure also was part of the company’s 2018 annual report. Some analysts remembered that disclosure… A reminder of the accounting change in Apple’s letter would have been helpful, if not expected, analysts said.”

Read more in the full article here.

MacDailyNews Take: Not Apple’s fault. Some Apple analysts are confused. As usual.

8 Comments

  1. All Cook talks about is Apple services. The only unique service a customer will lose when they leave the ecosystem is iMessage, IMO. All other features can be replicated with various Android apps.

    Apple Music, Homepod, SIRI, and iCloud all lag behind the competition.

    Think about this: IF YOU DRIVE AWAY CONSUMERS WITH AN INSATIABLE LUST FOR GREED, WHAT HAPPENS TO YOUR SERVICES THEN, MR. COOK?

    1. Mr Zerobrain:
      If you hate Apple and Tim Cook that much, why even bother coming here and posting your repetitive crap?

      Ah yes of course, you’re a troll and homophobe….

  2. Aren’t the analysts advising huge numbers of people how to invest their money? So basically the WSJ is blaming AAPL for not remembering they all have ADHD and are taking speed?

  3. Stock Market 101: Wall Street doesn’t control, decide or “set” the price of a stock. Nor does it “reflect” the state of the economy, let alone the state of any company represented.
    For example, the success of Apple (or lack thereof) has no direct effect on the price of Apple’s stock. Rather, when traders are (in general) more interested in selling it than buying it, the price of a stock declines. The opposite is also true.
    If you “Play” the stock market (trade) you quickly discover the only way to make money on a rising stock is to be among the first to buy it (when it is still low). And the only way to avoid losing money on a declining stock is to be among the first to sell it (when it is still high). The net result, folks, is traders don’t watch the company behind the stock. They are watching each other. If a few start selling a stock, the rest rush to sell it, too. If they hear some news (or some analyst’s comments) that they think will cause other traders to react, they will try to be among the first to so react. Thus they become a self-fulfilling prophecy.
    Investors, on the other hand, are interested in the company. They buy and hold for the long term. For them, it’s a savings account with (hopefully) a better return. But because of this, Investors don’t influence price changes in any way.
    Wall Street is not smart, stupid or clueless. People who cry, “They just don’t understand Apple,” don’t understand the market. It’s a mob-mentality, pure & simple. They don’t care about you, me or Apple. They only care about each other and any “skill” they may have is simply the ability to predict what other traders might do before they do it.

    In other words, “traders” are like sheep… If a few suddenly start to run, they all run and in the same direction. Only afterward will analysts attempt to figure out why.
    What’s the solution for Apple? Minimize their reliance/exposure to traders. So, you begin share buy-backs and bond issues – with an eye toward reducing your risk (from traders) or perhaps one day eliminating it! (Get out of the stock market and go private. All they’d really need is lots of money to fund themselves! Hmmm.)
    I’ll get off my soap-box, now.

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