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

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    Posted: 18 July 2011 04:04 PM #16

    ChicagoBob - 18 July 2011 06:37 PM
    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.

    What is the added pressure compared to producing accurate analysis.  That is an excuse for laziness.  Are you saying that since they cover many stocks and are paid to do research, so they should be conservative, and at what point is their conservative estimate worthless.  I say produce an accurate estimate and let the client decide wether to invest in a particular equity.  The whole system seems to be setup to fool people into believing the pros have a better understanding of the particular stock.  If we use Apple as an example how come a group of amateur analysis can consistently outperform the paid for performance group?

         
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    Posted: 18 July 2011 04:38 PM #17

    pats - 18 July 2011 07:04 PM

    What is the added pressure compared to producing accurate analysis.  That is an excuse for laziness.  Are you saying that since they cover many stocks and are paid to do research, so they should be conservative, and at what point is their conservative estimate worthless.  I say produce an accurate estimate and let the client decide wether to invest in a particular equity.  The whole system seems to be setup to fool people into believing the pros have a better understanding of the particular stock.  If we use Apple as an example how come a group of amateur analysis can consistently outperform the paid for performance group?

    I am theorizing that the professional consequences of forecasting high are worse for them than the consequences of forecasting low.  Therefore they will alway forecast low.  I think that is a separate issue from if they believe that their forecasts are the most accurate they can possibly be or are just “good enough”. 

    I leave it as an exercise to the reader guess what I think (big hint, I’m here and don’t subscribe to any of them grin

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  • Posted: 18 July 2011 04:41 PM #18

    ChicagoBob - 18 July 2011 07:38 PM

    I am theorizing that the professional consequences of forecasting high are worse for them than the consequences of forecasting low.  Therefore they will alway forecast low.

    Liabilities? That, and that people feel a loss more keenly than a gain, thus are more annoyed by an optimistic forecast that turns out to be too high than a pessimistic one that is exceeded.

         
  • Posted: 18 July 2011 04:59 PM #19

    adamthompson3232 - 18 July 2011 07:41 PM

    Bob, apple has beaten the highest analyst estimate for something like 10 consecutive quarters. No other company does that. And since the same analysts cover these stocks there is obviously far more conservative bias on AAPL than other stocks.

    Actually, I believe it’s something more like 20 consecutive qtrs.  Which, if you assume 30 estimates a qtr, is about 600 straight pro analyst estimates that have been too low.

         
  • Posted: 18 July 2011 06:02 PM #20

    Does anyone take into consideration USD steady decline knowing that large % of Apple sales come from abroad? Surely that translates as much more $$$$

    In canada, iphone 4 ( 16GB) is 649 CAD , which translates into ~681 USD

         
  • Posted: 18 July 2011 07:30 PM #21

    adamthompson3232 - 18 July 2011 07:41 PM

    Bob, apple has beaten the highest analyst estimate for something like 10 consecutive quarters. No other company does that. And since the same analysts cover these stocks there is obviously far more conservative bias on AAPL than other stocks.

    This is among the reasons I wrote the foundation for the article and spend the weekend doing the calculations. There are subjective factors, but the underlying drop in expenses relative to revenue should not be overlooked by any analyst.

         
  • Posted: 18 July 2011 11:44 PM #22

    adamthompson3232 - 19 July 2011 12:17 AM

    I love deagol. The link won’t work here but go to his blog.

    Let’s get the analysts to rework their estimates and Daniel’s style of genius will be crystal clear.

         
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    Posted: 19 July 2011 12:16 AM #23

    Horace has a great way to look at valuing Apple’s revenue streams and business enterprise.

    http://www.asymco.com/2011/07/18/a-new-way-to-value-apple/

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    AAPL: to boldly go where no stock has gone before

         
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    Posted: 19 July 2011 12:30 AM #24

    WS numbers would have been even further off if they hadn’t gotten an early peek at Unit numbers via PED IMO. Interesting how several of them made last minute changes.

    There is no “Liability” on their end. There’s enough disclaimers for anything that they say or do to fill the Taj Mahal.

    BTW, I still think that publishing AFB numbers doesn’t do the stock any favors. Just look at the whisper number (and yes, the stock has tanked post earning on “missing the whisper number”). Discussion for another day.

         
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    Posted: 19 July 2011 12:55 AM #25

    adamthompson3232 - 19 July 2011 03:43 AM
    ChasMac77 - 19 July 2011 03:30 AM

    WS numbers would have been even further off if they hadn’t gotten an early peek at Unit numbers via PED IMO. Interesting how several of them made last minute changes.

    There is no “Liability” on their end. There’s enough disclaimers for anything that they say or do to fill the Taj Mahal.

    BTW, I still think that publishing AFB numbers doesn’t do the stock any favors. Just look at the whisper number (and yes, the stock has tanked post earning on “missing the whisper number”). Discussion for another day.

    I don’t think the whisper number matters one iota but there’s no way to prove it. Bottom line is that results and guidance drive the stock. AAPL’s guidance is always 25% lower than where actuals will be (+/- a tiny bit) and since the actual numbers are getting so large the delta between guidance and actuals in absolutely dollars is getting bigger and bigger. I am looking forward to some absolutely shocking actual numbers for the September quarter and December quarter. I am thinking $8.00+ easy for September and $12.00+ for the December. Call me
    crazy all you want but I think this is going to happen.

    A few weeks ago I would have thought you were drinking Nagrani’s Kool-aide…...but now I am right with you. Deagol is well over 8 bucks in his outlook for September. And what is really scary is that things don’t have to break just right for your numbers to come true, they just don’t have to break terribly wrong!

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    Posted: 19 July 2011 01:09 AM #26

    Red shirted ensign - 19 July 2011 03:55 AM

    Deagol is well over 8 bucks in his outlook for September. And what is really scary is that things don’t have to break just right for your numbers to come true, they just don’t have to break terribly wrong!

    Tetrachloride - 02 July 2011 02:51 PM

    ....

    Going nuclear

    .          Revenue    Units   ASP
    Macs          6942     5200  1335
    iPod          1710     9500   180
    iPhone       16450    25000   658
    iPad          7320    12000   610
    iTunes        2000
    Peripheral     700
    Software      1200
    ---------------------
    Total        27114
    Gross margin  41.0 

    OpEx          2700
    OI           12192
    OI
    &E           130
    Tax           23.7 
    %

    Shares         940

    EPS        
    10.00 

    July 2nd, 2011

    It can happen if .......

    [ Edited: 19 July 2011 01:16 AM by Tetrachloride ]      
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    Posted: 19 July 2011 01:17 AM #27

    Major typo—I had manually typed these from my spreadsheet, not cut and paste.

    The iPhone unit sales would have to be 25000.  I thought something was too easy.

         
  • Posted: 19 July 2011 02:30 AM #28

    Good to see the AFB analysts looking forward to the December quarter. I’ll issue my first set of estimates following release of the June quarter numbers.

         
  • Posted: 19 July 2011 02:46 AM #29

    Congrats to Robert for calling attention to not only of the relationship between net income as a % of sales (of which OPEX is a significant factor) but also the low sales figures used by WS. 

    A nit:  I might have sorted the table in ascending order as PED does with EPS #s (e.g. from more accurate to less)..  At first blush, it appeared the pros were coming out on top.  grin 

    WS price targets are generally better than their EPS estimates, because the latter lend themselves to more accountability than erroneous 12 month price targets that can be “covered” by revisions.  Price targets never see any accountability because the 12 month targets keep fading into the future, like a mirage.

         
  • Posted: 19 July 2011 03:27 AM #30

    Mercel - 19 July 2011 05:46 AM

    Congrats to Robert for calling attention to not only of the relationship between net income as a % of sales (of which OPEX is a significant factor) but also the low sales figures used by WS. 

    A nit:  I might have sorted the table in ascending order as PED does with EPS #s (e.g. from more accurate to less)..  At first blush, it appeared the pros were coming out on top.  grin 

    WS price targets are generally better than their EPS estimates, because the latter lend themselves to more accountability than erroneous 12 month price targets that can be “covered” by revisions.  Price targets never see any accountability because the 12 month targets keep fading into the future, like a mirage.

    Thanks for the feedback. Those numbers were a weekend’s worth of work.