The Macalope Daily: A surfeit of bad analysis

Despite this being the territory he was born to patrol, it’s sometimes astounding to the Macalope how bad some of the analysis of Apple is, even after all these years and all these public pantsings.

Sigh. Maybe it’s our fault. Maybe we haven’t pantsed these analysts enough. Or maybe we focused too much on pantsing and neglected other forms of explaining to someone how they’re wrong. Like wedgies. Or snicker-snagging.

Whatever the case, it’s completely wasted on some of these people. Paul Thurrott, for instance, says things like “Apple’s fans are more interested in spending money than they are with facts” when the iPhone 4S sets sales records primarily because that’s just his shtick. He’s playing to his audience. The other reason he does it is because those grapes are sour: Paul’s pals in Redmond can’t seem to give away Windows Phone Plays For Sure Enterprise Edition for Workgroups 7 units.

You can explain to people until you’re blue (or red) in the face why Apple only makes iPhones with 3.5-inch screens (tip o’ the antlers to Daring Fireball) and you’ll still get size queens going on and on about how the iPhone will eventually fail because it doesn’t have a 4-inch screen. Even though this day never comes, it’s always out there, waiting in the wings, and the fact that you Apple fans can’t see that is, well, pff, it’s just, well, dur, pssh.

It’s not only on the business side that we’re inundated with herds of analysts loudly mooing the same conventional wisdom, it’s also—as we saw on Tuesday—on the finance side.

The idea is that the market had baked in the assumption that Apple would meet Wall Street analysts’ estimate of $7.39 per share and is now correcting because the company reported earnings of $7.05 per share. Here’s the horny one’s problem with this.

First is the charmingly farcical verbiage that Apple “missed estimates.” Whose estimates did the company miss, Bud Fox? Not its own. Apple’s guidance was for $5.50. In a normal world the headlines would be “NOTORIOUSLY BAD ANALYSTS MISS AGAIN.” Instead, it’s supposedly somehow Apple’s fault. Whatever.

But, more importantly, let’s look at what Apple said about next quarter:

Oppenheimer told analyst to expect December quarter revenues of $37 billion—that’s a 38 percent jump from the $26.74 billion Apple recorded last year. Apple expects earnings per share of $9.30, up from $6.43 last year.

Holy crap. That’s a monster quarter, and we already have evidence Apple can do it since the iPhone 4S is blowing away sales records.

So, there’s two ways to react in this situation. You can take a company that consistently beats its guidance at its word and hang on to your shares, giggling to yourself like a gleeful miser…

Or, you can sell your shares because Apple didn’t hit the made-up estimates of a bunch of nitwits who never get the company’s earnings right.

Your choice, Wall Street geniuses.

(Disclosure: the Macalope holds an insignificant number of Apple shares.)

[Editors’ Note: In addition to being a mythical beast, the Macalope is not an employee of Macworld. As a result, the Macalope is always free to criticize any media organization. Even ours.]

Subscribe to the iOS Tips & Trends Newsletter

Comments