Further proof that analysts are idiots
Y/Y profits up 85%, new Q1 phone has sold 4M in one weekend, SELL, SELL, SELL!
Apple has released its financial results for its fourth fiscal quarter, and in doing so it handed conservative Wall Street prognosticators a rare win: Cupertino failed to meet or exceed analysts expectations for the first time in many a moon. On Monday, Fortune averaged a number of independent analysts's predictions and came …
I agree with you that it is ridiculous for them to sell the stock down but the theory here is actually with them - said theory states that the market capitalisation of a company should be equal to the net present value of all future cashflows that are expected to accrue to the shareholders.
In simpler language this means that the share price is equal to all the expected payouts (essentially dividends, unless a company takes Dell's (apparently misconstrued) advice and actually shuts itself down and returns the money it makes from selling its assets to its shareholders) for the rest of perpetuity, reduced somewhat to account for the fact that money now is worth more than money later (the bird in the hand theory).
Thus if the consensus was that a firm would generate X in profit and that consensus was believed then it would probably be baked into the share price. If it missed that target then the share price should fall by whatever the miss was plus or minus (generally minus) whatever this performance is believed to say about the future.
This is all theory of course and, as with most economic theory, assumes a degree of calculation beyond the average super computer let alone human and, most severely, excludes the fact that people speculate based not at all on the fundamentals of a company's prospects.
Half the predictions in general should be too optimistic, the other half overly pessimistic --- if the average was nonzero, you'd have to add/subtract that difference: nothing new here then.
But given that the current stock value is based on the assumption that the prediction was right, it is correct that the value goes down as fast as the correct data is shown (or up if it proved pessimistic)... So what is your point?
Whether "sell" or "hold" depends on how you see it --- will there be a great new computer soon? There's little marrow to be sucked from the bones of the iPod, iPhones are in a crowded market and not making technological leaps forward, ... : how do you justify predicting another say 40%-80% higher profits next year? Ifyou don't actually expect shrinking turnover? Ah, you don't see an explanation? Well, "sell" it is then.
So none of the predictions were right, but some were the least wrong, and as a result Apple's shares fell, despite profit being up substantially. Why didn't shares in the companies making the predictions fall, since none of them got it right? There's a reason people are demonstrating in the streets, Wall Street has gone completely insane.
The change of the stock price on wall street will do nothing to how Apple runs. Wall Street is simply using announcements about Apple as a way to build interest to increase the volume of trading of gambling markers whose values are associated to the company as the company was the organization who initially issues the gambling markers.
For companies that are SO DAMN HUGE that even a billionaire can only own one or two percent of it if they risked their entire family fortune on it and even huge companies can't own more than maybe 20% if they bankrupted the rest of their ventures to do so, the share has absolutely no impact over the control of the company. Apple DOES NOT need more cash any time in the foreseeable future and therefore, trying to hype he share does nothing for the company. This is because the only impact the share value can have on a company is if the company is hoping to dilute the share base and offer more shares to raise funds for a venture.
So... for the most part, the Apple share has absolutely nothing to do with Apple. Gamblers trading at the Wall Street casinos just simply use information released by or about Apple to increase the buzz on the share. If Apple were to get delisted from the stock market tomorrow, it would have little impact on the company itself.
Remember that there are only a few minor differences between Wall Street and a casino in Vegas.
1) People know that the gamblers in Vegas are in fact gamblers.
2) Alcohol use at a Vegas casino is promoted and often free. At Wall Street, it's done in the bathroom and behind closed doors or during celebrations. However in both places, there are places to get really drunk really cheap nearby after losing your ass at the tables.
3) Vegas casinos don't impact the price of milk and food for your babies as the idiots gambling on food in Wall Street does.
4) Vegas casinos are controlled by more respectable management.
5) Vegas has rules to stop people from cheating much quicker. Things like counting cards and using computers is not allowed.
6) The gamblers in Vegas tend to gamble using their own money. Gamblers on Wall Street tend to gamble using other peoples money and far too often the savings you placed in the bank to keep safe.
7) Gamblers in Vegas can't place bets like "If this one wins, gamble this much next on the other" they have to manage that manually. So, it's not like Wall Street where you leave it all up to a computer to make millions of transactions a minute where if the logic is slightly off or there's a glitch in the system millions are lost by accident.
Wall street has absolutely nothing to do with investing. Wall Street is about gambling. Investors don't need the ability to make trades at a seconds notice. Proper investors make proper loans to companies they believe in or need and don't sell out just because the curve of a line changes. Gamblers (wall street guys for example) gamble on anything and everything. They gamble on truck loads of wheat and when they get too expensive to sell, the truck full of wheat actually rots and the price of the other guys truck goes up because of lack of supply.
Screw the analysts and screw the stock traders.... I'm praying for a major market collapse. I'll live in a tent and grow food in the yard and feed my family while those guys and their families starve to death. I pray they take the lawyers and politicians that let it get like this with them.
if you believe that for a moment.
The moneymen made (semi-educated, some would say un-educated) guesses about a company (not just Apple).
They guessed 'wrong'.
The clueless consumers rush to buy (or sell) the stock of the company.
Fanbois of the company gnash their teeth, haters gloat.
Much theatrics ensue.
In the meantime, the moneymen, some of whom are the middle men, others are speculators, make more money from the trading, since money is made only if there is price change.
Who's to say that the moneymen are above agreeing tacitly which direction, up or down, to guess wrong.
Earning up massively.
Profits up massively.
From a company which sells non essential luxury goods in the middle of a world financial crises when most firms are happy to stay in the black.
Shares drop 6%.
Just which planet are these analysts on.
Given its financial performance I would rather have my money invested in Apple than any of the big money firms on Wall Street.
AAPL shareprice is based on current assets and projected earnings (lets ignore goodwill, stupid investors who invest emotionally, herd mentality, etc).
The projected earnings weren't as high as.. well.. projected.
So the shareprice goes down, because the company is worth an itty bitty bit less than people (buyers and sellers of shares) thought it would be at this point (the shareprice before the statement was released).
If you are still willing to buy apple shares at a 6% premium over the market price (what the market agrees / thinks / estimates that they are now worth after their recent financial statements... current assets + projected earnings) then I can sell you as many as you would like :)
As far as I know, Apple don't pay dividends on their shares, so I guess that "earnings per share" means the amount by which 1 Apple share has appreciated since last quarter.
Am I right? It would fit with my perception of Apple, which is that they are as good an investment as their next product - which is a pretty risky outlook.
EPS is roughly speaking the profit the company made divided by the number of shares. Ultimately all profits belong to the shareholders but whether, when and how those profits are returned to them is a matter for management (how much pressure they get on this issue depends on their shareholders).
So I could make a huge profit (EPS) and declare no dividend (e.g. Warren Buffet's Berkshire Hathaway) or I could make no profit and still declare a dividend from previous profits. Or I could announce a share buyback to raise the share price and cash some of my investors out (e.g Microsoft) or I could shut the whole thing down, sell everything off and give one massive payout to my shareholders.
I could even give them some of it back as tasty snacks at the Annual General Meeting which, although they effectively paid for it themselves, always seems to go down well.
We would have a lot more smug comments about how it serves that fat bastard Ballet right for not innovating and merely generating huge profits based on existing tech. Instead we have apologists blaming the analysts for getting it wrong. I despise analysts and Wall Street but grovelling fanboys don't particularly generate my sympathy.
Not an Apple cult member but it has been a while (I don't think it ever happened under Balder) that Microsoft reported an Y/Y increase of 50%....
Penalising a company/share because it only gives "stellar" results and not the "over impossible" results you were expecting is ridiculous...
No business can hope for trillion of $$$ to be handled over without reason, work or product... Doh sorry we are talking bankers here, of course they live in a world where you put your hand out and $$$ are pouring like rain
Apple always underestimated their expected earnings by 15-20% so that the headlines each quarter are "Apple exceeds earnings"
The analysts all know this and so add 20% to Apples figures - this is the real 'expected earnings' as far as the people putting down the money are concerned.
Apple did slightly less than 20% over it's announced estimate - less than the analysts (and probably apple) thought. Because lots of people were waiting on buying an iPhone because of an expected iPhone5 announcement that became the iPhone4s ?
Its always silly season for at least 24 hours after Apple releases their quarterly earnings report. AAPL *always* drops no matter the news.
Previously Apple's guidance was they expected $5.50/share of earnings this quarter. "Analysts" are perhaps feeling burned by Apple because the past 14 quarters Apple's guidance has been about 25% low. Analysts talked up ridiculous numbers and then fain disappointment when the real number is only $7.05, still over the usual 25% under-estimate which would have been $6.88.
For once the "expert analysts" are predicting earnings for Q1 under Apple's guidance. We'll see.
"Do you think that maybe the investors know that the iPhone was released simultaneously in six countries as opposed to just the US last year and therefore the 'record sales figures' compared to last year don't mean shit!"
I see your point but were they UP from the previous year in the US as well = YES.
No the world is screwed because, based on most of the comments here, people who are smart in one endeavour believe (wrongly in general) they are therefore smart in all endeavours. Buying shares is an investment (that means you can lose it all), the price of those shares are based upon the combined expectations of all the buyers. Since this is essentially an average, it will be too high for some and too low for others i.e. analysts will inevitably be wrong.
Apple have been trying to play games with their earnings guidance to boost the stock price, finally the average valuation has risen above the actual. When the real figures were announced, Apple was over valued so the price drops.
Sadly too many people here fall into the same trap with finance that ID'ers do with evolution. Ignoring the correctness of the theories because it doesn't fit their beliefs.
I thought that in the results of the last quarter, Tim Cook said they were expecting the figures in the comming quarter to be down due to transition of a new product. so Apple both recognised this themselves and told Wall Street it was going to happen 3 months ago. But seems so-called analysts are only content to listen to themselves and unnamed rumour sources.
the economy would be in a far healthier state if got rid of all analyst roles right now.
Or even, sack all the current analysts and replace them with a room full of monkeys with typewriters. I doubt anyone would know the difference.