AAPL has performed 5 years of the greatest under promise and over deliver scheme in the history of U.S. corporations. If you’ve ever questioned the intelligence of the analyst community you need look no further than the 35 brave young men and women who follow Apple Corp. In case you’re not familiar with Apple, they generally sandbag their guidance (guide way under analyst estimates) and then outperform every quarter. The stocks’ performance afterwards has generally been on the positive side.
For the first time in years we’re seeing some signs of intelligence within this thundering herd of 35. The analyst’s estimates are actually 10% higher than Apples actual guidance range for this quarter. Last quarter Apple said they would earn .90 (ha) – 1.00 in EPS. The analysts are currently sitting on an average estimate of 1.09 in EPS with revenues at 7.98B. Is that a joke? These people do nothing but crank out Excel spreadsheets all day and the best they can do is come up with some figure that is more or less in line with what Apple told them 12 weeks ago?. I ran the figures and came up with some pretty different figures:
I believe Apple will beat the 1.09 estimate handily and guide in the 0.95-1.05 range for next quarter with revenues in the 7.8-8.2B range. How the stock responds is anyones guess, but if we were able to bet on the stupidity of analysts I’d never lose….
Update (4:31 PM EST) – In what has to be the most shocking news of the day Apple reported a better than expected quarter and guided well below estimates (not our estimates though). Apple’s earning reports have officially become a non-event as all 35 analysts following the company are either in the companies pocket or completely inept.
“We are extremely pleased to report the best non-holiday quarter revenue and earnings in our history,” said Peter Oppenheimer, Apple’s CFO. “Apple’s financial condition remains very robust, with almost $29 billion in cash and marketable securities on our balance sheet. Looking ahead to the third fiscal quarter of 2009, we expect revenue in the range of about $7.7 billion to $7.9 billion and we expect diluted earnings per share in the range of about $.95 to $1.00.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.