AAPL Estimates: Why The Bloggers Get It And The Pros Are Left Behind

  • Posted: 18 July 2011 09:29 AM

    It’s happening so often now that it’s almost starting to become routine.

    Almost routine. But not quite yet!

    Congratulations (again) to Robert Paul Leitao, aka DawnTreader, for being featured on PED’s newest column: Why Apple’s earnings are growing faster than its revenue.

    DawnTreader and the AFB are finally getting their day in the sun. May it be a very long and very sunny day indeed.

    Congrats Robert. Well deserved. Very well deserved.

    [Title edited by DT]

    [ Edited: 18 July 2011 02:09 PM by DawnTreader ]      
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    Posted: 18 July 2011 09:31 AM #1

    FalKirk - 18 July 2011 12:29 PM

    It’s happening so often now that it’s almost starting to become routine.

    Almost routine. But not quite yet!

    Congratulations (again) to Robert Paul Leitao, aka DawnTreader, for being featured on PED’s newest column: Why Apple’s earnings are growing faster than its revenue.

    DawnTreader and the AFB are finally getting their day in the sun. May it be a very long and very sunny day indeed.

    Congrats Robert. Well deserved. Very well deserved.

    +1

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  • Posted: 18 July 2011 11:23 AM #2

    Thank you both!

    Now you know how I spent my weekend (not to mention my trip to the new Santa Clarita Apple retail store). This analysis didn’t come easy. I’ve got a big spreadsheet backing up the numbers.  LOL

         
  • Posted: 18 July 2011 12:08 PM #3

    DawnTreader - 18 July 2011 02:23 PM

    I’ve got a big spreadsheet backing up the numbers.  LOL

    There’s no call for you to be bragging to us about your big spreadsheet. Save that kind of braggadocio for Sassy and the boudoir.

         
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    Posted: 18 July 2011 12:36 PM #4

    Excellent work as usual.

    If your printer needs paper, I could arrange delivery of 40,000 pound truckload.

         
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    Posted: 18 July 2011 01:01 PM #5

    FalKirk - 18 July 2011 12:29 PM

    ... PED’s newest column: Why Apple’s earnings are growing faster than its revenue...

    Why does PED’s table have one column of all the same number? Was that supposed to be the percentage for each analyst?

         
  • Posted: 18 July 2011 01:02 PM #6

    adamthompson3232 - 18 July 2011 02:55 PM

    Op ex estimates are clearly an issue but gross margin estimates are still the biggest problem. Since cost of sales is roughly 4x op ex expense any error on gross margin is roughly 4x more important than the same % error on op ex. And the pros can’t estimate Apple’s gross margins to save their friggin lives. They’re modeling a 120 basis point beat when Apple’s smallest beat the last 4 quarters was 190 basis and the average beat is over 250 basis points. This is by far their biggest problem. Whatever. They’ll all be wrong…again.

    With PED publishing your research in a mainstream financial rag, an article detailing this aspect of the ‘Pros’ forecasting would go a long way to discrediting their acumen/credibility.

    This is important because so many follow the ‘Pros’, and their consistent understatement of Apple’s future performance does have an effect on AAPL’s performance.

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  • Posted: 18 July 2011 01:09 PM #7

    K447 - 18 July 2011 04:01 PM
    FalKirk - 18 July 2011 12:29 PM

    ... PED’s newest column: Why Apple’s earnings are growing faster than its revenue...

    Why does PED’s table have one column of all the same number? Was that supposed to be the percentage for each analyst?

    The one column is a constant that represents the percentage of revenue that flowed to the net income line during the first six months of the fiscal year. It’s used as a constant to demonstrate the variance from that percentage in each of the analyst estimates.

    While some variance is expected, it demonstrates how much the estimates from the pros sandbag the numbers. They have not adjusted their net income ratios to the recent trend and underestimate Apple’s results by wide margins.

         
  • Posted: 18 July 2011 01:09 PM #8

    FalKirk - 18 July 2011 03:08 PM
    DawnTreader - 18 July 2011 02:23 PM

    I’ve got a big spreadsheet backing up the numbers.  LOL

    There’s no call for you to be bragging to us about your big spreadsheet. Save that kind of braggadocio for Sassy and the boudoir.

    I’ll make sure Sassy sees this post!  LOL

         
  • Posted: 18 July 2011 01:14 PM #9

    Gregg Thurman - 18 July 2011 04:02 PM
    adamthompson3232 - 18 July 2011 02:55 PM

    Op ex estimates are clearly an issue but gross margin estimates are still the biggest problem. Since cost of sales is roughly 4x op ex expense any error on gross margin is roughly 4x more important than the same % error on op ex. And the pros can’t estimate Apple’s gross margins to save their friggin lives. They’re modeling a 120 basis point beat when Apple’s smallest beat the last 4 quarters was 190 basis and the average beat is over 250 basis points. This is by far their biggest problem. Whatever. They’ll all be wrong…again.

    With PED publishing your research in a mainstream financial rag, an article detailing this aspect of the ‘Pros’ forecasting would go a long way to discrediting their acumen/credibility.

    This is important because so many follow the ‘Pros’, and their consistent understatement of Apple’s future performance does have an effect on AAPL’s performance.

    The percentage of revenue that flows to the net income line includes Cost of Sales (the inverse of gross margin), OpEx and taxes.

    Gross margin is subjective and it’s up to each analyst to determine their own number. But missing the drop in OpEx as a percentage of revenue is a different matter. The trend is unmistakable and is a big factor in the eps outcome.

         
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    Posted: 18 July 2011 01:17 PM #10

    DawnTreader - 18 July 2011 04:09 PM
    FalKirk - 18 July 2011 03:08 PM
    DawnTreader - 18 July 2011 02:23 PM

    I’ve got a big spreadsheet backing up the numbers.  LOL

    There’s no call for you to be bragging to us about your big spreadsheet. Save that kind of braggadocio for Sassy and the boudoir.

    I’ll make sure Sassy sees this post!  LOL

    I had some quip about gross margins all set up, but I think this has gone long enough.

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  • Posted: 18 July 2011 02:10 PM #11

    FalKirk:

    Thanks for starting this topic and I appreciate the special mention. I’ve changed the title to reflect the content and the discussion.  grin

         
  • Posted: 18 July 2011 02:33 PM #12

    Gregg Thurman - 18 July 2011 04:02 PM

    With PED publishing your research in a mainstream financial rag, an article detailing this aspect of the ‘Pros’ forecasting would go a long way to discrediting their acumen/credibility.

    This is important because so many follow the ‘Pros’, and their consistent understatement of Apple’s future performance does have an effect on AAPL’s performance.

    Gregg:

    This is such an important matter I invested the weekend performing the analysis. If the estimates from the pros are revised to reflect Apple’s net income ratios to revenue, it will cause an increase in eps estimates and the corresponding price targets.

    This was a lot of work, but worth the time invested.

         
  • Posted: 18 July 2011 02:54 PM #13

    DawnTreader - 18 July 2011 05:10 PM

    FalKirk:

    Thanks for starting this topic and I appreciate the special mention. I’ve changed the title to reflect the content and the discussion.  grin

    Well, Robert, I realize that you are a man of honor, integrity and high moral principles, but since I possess none of those qualities, just to spite you, I am going to re-change the title to:

    “DawnTreader whips out his big Spreadsheet”.

         
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    Posted: 18 July 2011 03:22 PM #14

    FalKirk - 18 July 2011 05:54 PM

    “DawnTreader whips out his big Spreadsheet”.

    Juvenile, but funny!

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    Posted: 18 July 2011 03:37 PM #15

    FalKirk - 18 July 2011 05:54 PM

    “DawnTreader whips out his big Spreadsheet”.

    +1

    LOLZ!! grin


    Seriously tho: I think everyone here should already understand the pressures on the “professional” analysts to produce conservative numbers (i.e. low ball). I’m not say it excuses the practice, but it should be understood that its part of their jobs.

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