As the Macalope's learned and smartly attired readers may remember, last quarter was a rare win for Wall Street analysts over the pajama-wearing, unshaven (even the ladies) and malodorous independent bloggers. But how’d it go this quarter? As is his wont, Philip Elmer-Dewitt brings us a look at how the estimating of Apple’s results went down.
Ah. So back to normal, then.
When the Macalope saw Elmer-Dewitt’s chart of the estimates just prior to the earnings call, he immediately assumed it was grouped with independent analysts at the top and Wall Street analysts at the bottom. But, no, it wasn’t (other than coincidentally). It was sorted by their estimates for revenue. Of course, Elmer-Dewitt is picking his analysts, so there are probably some independent analysts out there who routinely project a pox on Apple's house, but nobody’s interested in those guys. Not even their spouses.
No, the real question is why the big brokerage houses—Barclays, Goldman Sachs, JP Morgan—continue to let these analysts “analyze” Apple. Or pudding.
OK, yes, they were more right than wrong last quarter. But should someone who’s batting .200 over the last year be in the Major Leagues? One analyst, Gabelli & Co.’s Hendi Susanto, thought Apple would miss its own guidance. That’s just nuts. That’s not being conservative, that’s an audacious bet against the company.
It seems a little odd that the Macalope would have to explain this to a bunch of Wall Street analysts, but this is about opportunity cost. If you tell someone that Apple is going to miss its guidance (Apple never misses its guidance), they might decide to take their money out of Apple and put it into something else they think will do better.
Of course, if they’re listening to Hendi Susanto, they’re probably crazy so they might take their money out of Apple and put it into a sock. Or simply light it on fire.
Being “conservative” doesn’t do your clients any good. Being right does.
And it’s not like these analysts couldn’t have seen this coming. Back in December Andy Zaky laid it all out.
If you look at the past two years as exhibited in this chart below, Apple has consistently beaten its revenue guidance by 12-18% every quarter. That means regardless of whatever Wall Street is doing or thinking, Apple continues to deliver the same type of beat on its guidance. Whether Apple meets or beats Wall Street expectations doesn’t really figure into Apple’s thought process.
The idea that eventually Apple will come crashing to the ground is probably true, at least on the geologic timescale. But to predict that its going to start to happen this quarter based on no deeper thought than “Gosh, their numbers are large” isn’t analysis, it’s superstition.
[Editor’s 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.]