or Connect
AppleInsider › Forums › Investors › AAPL Investors › Apple shifting its guidance to stop being blamed for "missing" analyst expectations
New Posts  All Forums:Forum Nav:

Apple shifting its guidance to stop being blamed for "missing" analyst expectations

post #1 of 76
Thread Starter 
This week, Apple announced plans to change the way it outlines guidance, an effort apparently intended to thwart excessively enthusiastic analyst expectations that have resulted in a series of "misses" ultimately blamed upon the company itself.

"In recent years," Apple's chief financial officer Peter Oppenheimer noted in his prepared comments in the company's earnings call, "our guidance reflected a conservative point estimate of results every quarter that we had reasonable confidence in achieving.

"Going forward, we plan to provide a range of guidance that reflects our belief of what we are likely to achieve. While we cannot forecast with complete accuracy, we believe we are likely to report within the range of guidance we provide. Therefore, for the March quarter, we're providing revenue guidance of between $41 billion and $43 billion compared to $39.2 billion in the year ago quarter."

Fool me once, Can't get fooled again



For years, Apple has offered forward looking guidance outlining the minimum performance that company executives were reasonably confident they could reach over the coming quarter.

As the company's performance has accelerated over the past several years of rapidly increasing sales of iPods and then iPhones, iPads and new Macs, Apple has consistently trampled its own guidance, resulting in the cynical perception that the company's forward looking figures were excessively conservative, to the point where critics began describing them as "sandbagging."

Sandbagging figuratively suggests an effort to misrepresent one's own abilities early on in order to throw off one's competition. The term is often applied to billiard, chess or poker players who deceptively play under their true skill level in order to fool opponents into betting against them in a subsequent, higher stakes game.

While Apple certainly benefits from providing conservative guidance it can be fully confident about delivering, it would be absurd to suggest the company is attempting to hustle the market over the long term in a series of quarterly guidance "sandbagging," any more than card shark could repeatedly fool the same naive players to bet against it after a series of expert hands of card playing.

Raising the bar too high



On the contrary, Apple's consistent ability to exceed its stated guidance objectives has resulted in analysts setting their own expectations for the company, at a level significantly above what Apple has stated it is reasonably confident that it can achieve.

Thus, despite a series of record quarterly results Apple has set and then shattered as the company consistently outperforms the rest of the PC industry, the smartphone industry and other players in the media and mobile software markets, Apple has not consistently hit the inflated expectations of the market set by analysts hoping to guess by exactly how much the company will exceed its own guidance.

To stop this cycle of reported "misses," Apple will now provide a range of guidance, something many other companies already provide. By providing a realistic range, rather than a conservative minimum, Apple can effectively limit the expectations analysts can set.

Following the announcement, a research note by J.P. Morgan analyst Mark Moskowitz observed, "we think the new guidance commentary is not much of a change and could restore beat-and-raise potential to the model."

Moskowitz added that the recent "sharp decline" in Apple's stock "was driven by a widening chasm between Apple?s fundamentals and investor expectations. The new guidance commentary did not help either. Investors are fearful that iPhone growth has peaked and consolidated gross margin is going to collapse. In contrast, we believe a still-ramping iPhone 5 can drive reaccelerating revenue growth, particularly as more wireless networks roll out LTE. While increasing sales of iPad mini could drag on gross margin, improving yields on iPhone 5 should provide a partial offset."

He also described Apple's new guidance approach as "no need to be frustrated," and stated, "Initially, the introduction of Apple?s new guidance approach of offering a range versus a single point of reference confused and frustrated investors last night. As the dust settles, though, we think that not much has changed. The mid-point of the new guidance range results in a similar % delta versus consensus estimates as had been exhibited in prior quarters when only a single point was offered."

Moskowitz's report added, "we think the company?s introduction of more explicit guidance commentary related to gross margin signals there is no cause for alarm. In recent weeks, there has been increasing bear mongering in the investor base that gross margin could collapse this year. In our view, the Mar-Q guidance for gross margin of 37.5% to 38.5% should dispel those bearish concerns. Equally important, we also think that the new guidance approach is intended to reset some of the more outlandish estimates across the sell-side and buy-side bases, which stands to set the stage for restoring beat-and-raise potential in the model."



Restoring reality to expectations



Under Apple's new approach to guidance, if an analyst sets expectations well outside the guidance range Apple outlines, it will be more clear that the "miss" is the fault of the analyst's math, not in Apple's ability to deliver upon performance targets.

Of course, for the strategy to be an effective deterrent to stop analysts from throwing out excessively unrealistic expectations that are not supported by facts, Apple will have to offer realistic guidance ranges and then not exceed its own stated objectives by too great of a margin.

If it can do this, the company stands a good chance of breaking the cycle of "misses" that have been recorded without regard for Apple's own guidance figures. Were Apple to simply begin offering a less conservative guidance target number, analysts would be induced to just raise their own expectations even higher, based on Apple's historical practice of handily beating its own guidance.

On the other hand, if Apple continues to offer a lowball guidance range and then shatter the upper end of that range with barnstorming results, analysts will likely continue using Apple's own guidance as a foundation for building their own lofty expectations. And as in the past, Apple will have a hard time meeting those external expectations simply because they are not realistically attainable, even by the world's most successful tech company.

Providing a range of guidance isn't the only change Apple has made in reporting its financials, as another Apple analyst has detailed to AppleInsider. Tomorrow, we will outline what other changes Apple has made, and the long term significance this analyst believes is behind the changes.
post #2 of 76
The trouble wasn't Apples numbers but the analysts raising theirs way too high. Often off the rumors of what Apple might release etc.

Then when their guess at the new whatever's features ones not come true they poopoo the sales estimates and rig the stock down

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

Reply

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

Reply
post #3 of 76

I'm thinking that this might end up being a good thing. The pundits, the analyst douchebags and other people who think that they know what they're talking about have been setting Apple up to fail, with their unrealistic expectations for Apple. I was looking at this historical Apple guidance chart last week, which I can't seem to find now, and it seems that this is nothing new for Apple, because they have reported this way in the past. Instead of just giving out one figure, they provided a range. And the interesting thing is that I don't believe that they had a single earnings miss, while they were using that method.

 

So, it seems like Apple is merely going back to their old system which they had used in the past. I wasn't following Apple's stock that far back, so maybe some old timers might remember it.

 

I'm going to see if I can find that chart which I came across last week.

post #4 of 76
Instead of Apple offering a prediction and a hundred analysts offering a prediction, why don't we all just wait and see what the sales actually were. It would save a lot of effort by a lot of smart people that could be put to better use.
post #5 of 76
Apple used to blow away the rosiest of expectations; how about returning to that?
post #6 of 76

I didn't find the exact chart which I was looking for, but I found a similar one, which shows what I was mentioning about Apple's guidance. Isn't Q1 2010 - Q3 2010 similar to what Apple has implemented now again? You can see how Apple provides a range, instead of just one figure.

 

post #7 of 76
Quote:
Originally Posted by ascii View Post

Instead of Apple offering a prediction and a hundred analysts offering a prediction, why don't we all just wait and see what the sales actually were. It would save a lot of effort by a lot of smart people that could be put to better use.

If they don't release a prediction, WS will.
Quote:
Originally Posted by ifij775 View Post

Apple used to blow away the rosiest of expectations; how about returning to that?
Because WS will always make it higher.
post #8 of 76
Originally Posted by ifij775 View Post
Apple used to blow away the rosiest of expectations; how about returning to that?

 

Because as hard as everyone else is failing, Apple can't make 100.0000001% of the profits of the mobile industry. But Wall Street analysts can claim they will.

Originally Posted by helia

I can break your arm if I apply enough force, but in normal handshaking this won't happen ever.
Reply

Originally Posted by helia

I can break your arm if I apply enough force, but in normal handshaking this won't happen ever.
Reply
post #9 of 76
Quote:
Originally Posted by ifij775 View Post

Apple used to blow away the rosiest of expectations; how about returning to that?

 

It's kind of hard when those expectations are pure BS and so high that no other tech company in the history of the world has achieved them before.

post #10 of 76
Quote:
Originally Posted by Tallest Skil View Post

Because as hard as everyone else is failing, Apple can't make 100.0000001% of the profits of the mobile industry. But Wall Street analysts can claim they will.

Actually, they could.

Let's say the industry earns $100 M. Apple could earn $110 M - if someone lost $10 M and everyone else broke even.
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
Reply
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
Reply
post #11 of 76

Analysts have no idea how to predict the sales for new products, how about more of those? This would give Apple the opportunity to under promise and over deliver. 

post #12 of 76
Quote:
Originally Posted by ifij775 View Post

Analysts have no idea how to predict the sales for new products, how about more of those? This would give Apple the opportunity to under promise and over deliver. 

So basically Apple has to intro and sell new products every qtr to surprise Wall Street.
post #13 of 76

It's funny, when you think about it for a moment, the whole Wall Street guidance and analyst game is pretty bizarre. It's practically a scam. If somebody was the best analyst in the world, they would be able to predict a certain figure, and it would be spot on to the penny, when the actual real results are revealed. If Apple beats their own guidance, but doesn't meet whatever figure some Wall Street analyst decides to pull out of their ass, then it is the analyst who has done a piss poor job at predicting. They're the ones who should be punished and lose their jobs, because they suck at it. They should take responsibility for their own horribly wrong predictions.

post #14 of 76
Quote:
Originally Posted by ifij775 View Post

Apple used to blow away the rosiest of expectations; how about returning to that?

 

 

The problem is not with Apple, but the rosiest of predictions rose to the land of fantasy. Apple is supposed to guide conservative. That is responsible. If Apple beats its own expectations, but falls short of the so called experts guesses, why is it Apple is to blame? The experts goofed. 

post #15 of 76
post #16 of 76
In my opinion they need to start refuting the bullshit rumors that seem to come out of nowhere. A simple "that's not correct" from Cook would do nicely when one of these outrageous rumors gets started.
post #17 of 76

Found this on the Loopinsight.com website on how to predict Apple stock;

 

 

post #18 of 76
This never made sense to me. As profits and revenue increase, and new products are rolled out, stock price dives.

I think most new Apple followers don't realize that a gap of a few years is perfectly normal between flagship product releases. That its been 3 years since the iPad is in line with past Apple performance.
post #19 of 76
Quote:
Originally Posted by acslater017 View Post

I think most new Apple followers don't realize that a gap of a few years is perfectly normal between flagship product releases. That its been 3 years since the iPad is in line with past Apple performance.

There seems to be many, too many, that think that it was 3 years between the iPhone and iPad release that Apple is now due for another revolutionary new product category because it's been 3 years. They are ignoring the 6 years between the iPod and iPhone and the 17 years between the Mac and iPod. It's a desire for something new over any rational basis why something new would be ready.

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply
post #20 of 76
Quote:
Originally Posted by Quadra 610 View Post

smh at the comments:

http://www.neowin.net/news/apple-loses-most-valuable-company-title-to-exxon-mobil

As someone in the comments pointed out the dot on the graph represents when Steve Jobs passed away yet the stock claimed quite quickly under Cook. Additionally, when Cook took over during JObs previous hiatus the stock rose drastically. It's simply amazing that people are claiming that Apple can't survive without Jobs despite breaking records and coming out with amazing products like the new Retina MBPs.


"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

Reply
post #21 of 76

This makes sense to me. While it definitely led to short term pain (the stock dropped more since Phil Oppenheimer made his comments on the analyst call than it did to the earnings release itself), it hopefully leads to long term gain. Truth be told, the stock probably should never have risen to $700. But now I think the market has gotten irrationally pessimistic about the company. Samsung is Apple's only real competition right now, and their profit margin is less than half of Apple's. Market share is overrated. If Apple signs a deal with China Mobile they may well get their "mojo" back.

 

FD: I'm long Apple.

post #22 of 76
Quote:
Originally Posted by lkrupp View Post

In my opinion they need to start refuting the bullshit rumors that seem to come out of nowhere. A simple "that's not correct" from Cook would do nicely when one of these outrageous rumors gets started.


because they'll keep on having to respond. If they don't respond, it's then implied as a confirmation.

post #23 of 76
Quote:
Originally Posted by lkrupp View Post

In my opinion they need to start refuting the bullshit rumors that seem to come out of nowhere. A simple "that's not correct" from Cook would do nicely when one of these outrageous rumors gets started.


Apple would then be answering all the BS rumors and these 'people' who have a friend that knows 'someone' or who heard 'something' would keep coming up with more and more outlandish rumors. Apple couldn't respond to every rumor if they tried. If Apple were stupid enough to try and missed or ignored one rumor then the media would it take that rumor as 'fact' and hold Apple accountable because Apple didn't deny it. It would be a 'no win' scenario for  Apple.


Edited by Realistic - 1/25/13 at 10:21pm

"A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools." Douglas Adams

Reply

"A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools." Douglas Adams

Reply
post #24 of 76
Tallest Skil wrote:
Because as hard as everyone else is failing, Apple can't make 100.0000001% of the profits of the mobile industry. But Wall Street analysts can claim they will.

Really?? Geez I could have swore I saw Samsung up 73%. I could be wrong though.
post #25 of 76
Quote:
Originally Posted by ascii View Post

Instead of Apple offering a prediction and a hundred analysts offering a prediction, why don't we all just wait and see what the sales actually were. It would save a lot of effort by a lot of smart people that could be put to better use.

 

Good luck with that. The market rises or falls based on those predictions. Hell, the Futures Market is based on predictions.

post #26 of 76
Quote:
Originally Posted by ifij775 View Post

Apple used to blow away the rosiest of expectations; how about returning to that?

 

Oh dear ...

Quote:
Originally Posted by ifij775 View Post

Analysts have no idea how to predict the sales for new products, how about more of those? This would give Apple the opportunity to under promise and over deliver. 

 

Oh my ...

 

 

The problem with getting your information from sites like this is that what is written is not always based in reality. Remember that AppleInsider is not actually a news site (it used to be something close to a news site and it is very sad to see how far it's fallen); it is an aggregation engine for other articles that are in turn aggregation engines for other articles and the uneducated ramblings of analysts.

 

AppleInsider, MacRumors etc are really nothing more than a series of Chinese whispers designed to make money from ads. 

 

New products do not just appear overnight. They take time to design, build, test, scrap, redesign, build and test. Did you know that the iPad was conceived before the iPhone? In many cases, Apple may sit on a idea for years until the technology is available for them to actually make a decent stab at building it.

 

Having mugged the mobile tech industry of profits for the past six years then it is inevitable that growth will  slow down. That's just the way life works. I watched a report on the  BBC last night that was gushing over Samsung's profits, completely glossing over the fact that despite the fact they cover all mobile devices and price ranges; that they make and sell TV sets, fridges, laptops, desktops, bits of cars and whole aircraft engines and God knows what else, they still didn't make anywhere near the amount of money that Apple did.

 

Apple, who have to rely on a rather meagre range of widgets, phones and PCs. I find that most odd.

 

But growth is slowing down, and this is what Cook is looking to fix. He could throw lots of products into the market and see what happens. Samsung does this and, as I said, they're not making as much money as Apple. He could look to other markets, and he does appear to be doing this: there's a lot of Apple in China at the moment.

 

Or he could do what Steve Jobs suggested: Milk the market for all it's worth and then move on to the next big thing.

 

Rather that regurgitated news, what's needed is opinions based on facts and analysis, rather than hit-whoring hysteria.

 

Here's a good starting place:

 

http://www.slate.com/articles/technology/technology/2013/01/apple_earnings_report_don_t_let_its_stock_slump_fool_you_the_company_is.html

 

And I'm amazed more people don't read MacObserver.

 

Oh, and it's very easy to 'under promise and over deliver'. You come up with a figure and you halve it. Done. The trouble is that when faced with this constant under-promising, analysts then feel the need to over-promise on your behalf, which brings us to where we are today.


Edited by Rayz - 1/25/13 at 11:49pm
post #27 of 76

The truth is this site still cries and posts pictures of how people copied.  Though the pictures might be right and Apple might have won a disputed patent, its not helping.  The average consumer doesn't care or know about these lawsuits.  You know and I know Android is getting better, while iOS has been stagnant.  Apple's litigation and stale innovation for the future is the reason for the big tank in the market.  Samsung is trying to hit every niche in in the market whether it be size, OS, or form. Tallest Skil will obviously still cry and post more pictures of copying, but now its just laughable.  This is just great for the tech market that Apple is provoked by competitors.  Glad Apple is failing to innovate, makes it interesting to see them follow the market. Good for Samsung and Android pushing Apple to "Think Differently"


Edited by jbeez17 - 1/26/13 at 12:31am
post #28 of 76

"Samsung you better stop copying us!!" 'Otherwise, we will sue you, make a bigger iPhone with iPhone 3 specs by LG, and we will show you!" And by doing that we'll cannibalize our most high tech product with lower profits!! Sadly that's the Apple today.
 

post #29 of 76
Quote:
Originally Posted by acslater017 View Post

This never made sense to me. As profits and revenue increase, and new products are rolled out, stock price dives.

I think most new Apple followers don't realize that a gap of a few years is perfectly normal between flagship product releases. That its been 3 years since the iPad is in line with past Apple performance.

Take Amazon as an example they sell very thing under the sun with very low margins but the analysts guess they have a big future and promises humongous rewards because they guess it will be like Walmart in 20 years's time and so in the mean while they dream on.

 

One more thing to these analysts promises are more important than hard cash.

 

Just wondering how much do Amazon and google have in their cash reserves.

post #30 of 76
Originally Posted by SolipsismX View Post
As someone in the comments pointed out the dot on the graph represents when Steve Jobs passed away yet the stock claimed quite quickly under Cook. Additionally, when Cook took over during JObs previous hiatus the stock rose drastically. It's simply amazing that people are claiming that Apple can't survive without Jobs despite breaking records and coming out with amazing products like the new Retina MBPs.

 

think about what you post before posting… History says that when iCon isn't at Apple then Apple fails. Even when on sick leave he was still really there as the guiding mind. He's gone now..for good. Recent successes can be attributed to products he had a major hand in, but that pipeline is now wearing out and it's up to TC,JI etc. to come up with new stuff…or do what iCon did and steal the best ideas. Market is saying that they won't/can't. I agree. Major flaws in all the main products plus much better competition is the reason. The VFM in Apple products, which was always on a knife edge has been busted by Nexus 4/7 and Kindle. You don't NEED to spend THAT much anymore. Tablet is moving to 7" form factor which squeezes Apple's margins. iPhone demand is weakening..especially in the latest model. The computers are priced ridiculously and the OS has been going backwards since Leopard. None of this is rocket science. To give context, my household contains 2 iPhones, an iPod touch and an iPad….none of which we will replace with iOS devices next time. we used to have a ATV, a mac and another iPhone but we are moving away from it because there are better products out there for less money.

post #31 of 76
This whole thing is totally F'd. A company offering guidance is never a guarantee. The market is talking as if Apple is being deceptive, as if they somehow know they'll beat their guidance via crystal ball soothsaying. Analysts habitual inflating of expectations strictly off Apple's numbers is a set-up.

So now the market expects Apple to inflate its own expectations in order to join the ranks of idiot analysts who don't know how to put their own accurate numbers together. Then they'll miss their own numbers and what - everyone will be happy and buy? Bullshit.

This whole thing sticks of an ambush, and lots of people are getting rich off it.
post #32 of 76
Quote:
Originally Posted by jungmark View Post

So basically Apple has to intro and sell new products every qtr to surprise Wall Street.
No, it's just that a company sitting on $137B can take more risks. I believe even Steve Jobs marveled at what a SMALL team of people can accomplish. I realize innovation takes time, but they could buy it, too. They bought Siri, LaLa, and many others I forget
post #33 of 76
Quote:
Originally Posted by ifij775 View Post

Apple used to blow away the rosiest of expectations; how about returning to that?
When you get as big as Apple is how do you do that? Law of large numbers come into play.
post #34 of 76
Quote:
Originally Posted by Rayz View Post

Oh dear ...

Oh my ...


The problem with getting your information from sites like this is that what is written is not always based in reality. Remember that AppleInsider is not actually a news site (it used to be something close to a news site and it is very sad to see how far it's fallen); it is an aggregation engine for other articles that are in turn aggregation engines for other articles and the uneducated ramblings of analysts.

AppleInsider, MacRumors etc are really nothing more than a series of Chinese whispers designed to make money from ads. 

New products do not just appear overnight. They take time to design, build, test, scrap, redesign, build and test. Did you know that the iPad was conceived before the iPhone? In many cases, Apple may sit on a idea for years until the technology is available for them to actually make a decent stab at building it.

Having mugged the mobile tech industry of profits for the past six years then it is inevitable that growth will  slow down. That's just the way life works. I watched a report on the  BBC last night that was gushing over Samsung's profits, completely glossing over the fact that despite the fact they cover all mobile devices and price ranges; that they make and sell TV sets, fridges, laptops, desktops, bits of cars and whole aircraft engines and God knows what else, they still didn't make anywhere near the amount of money that Apple did.

Apple, who have to rely on a rather meagre range of widgets, phones and PCs. I find that most odd.

But growth is slowing down, and this is what Cook is looking to fix. He could throw lots of products into the market and see what happens. Samsung does this and, as I said, they're not making as much money as Apple. He could look to other markets, and he does appear to be doing this: there's a lot of Apple in China at the moment.

Or he could do what Steve Jobs suggested: Milk the market for all it's worth and then move on to the next big thing.

Rather that regurgitated news, what's needed is opinions based on facts and analysis, rather than hit-whoring hysteria.

Here's a good starting place:

http://www.slate.com/articles/technology/technology/2013/01/apple_earnings_report_don_t_let_its_stock_slump_fool_you_the_company_is.html

And I'm amazed more people don't read MacObserver.

Oh, and it's very easy to 'under promise and over deliver'. You come up with a figure and you halve it. Done. The trouble is that when faced with this constant under-promising, analysts then feel the need to over-promise on your behalf, which brings us to where we are today.
I am in no way suggesting Samsung's version of "innovation" or even Google's throw crap against the wall and see what sticks. I don't think Apple needs 12 different phones. I think they need to go after new markets. Dare I suggest an enterprise strategy? Companies can appreciate paying more for a better product. How does Apple ignore this segment? FaceTime is not an enterprise video conferencing solution. No screen sharing, note taking, recording, etc. How about the fact that probably about 50% of all meetings (WAG) are ruined by people being unable to hook their computer to a projector instantly. Could AppleTV solve this? Absolutely. Is this a risky bet? Sure, Microsoft dominates enterprise sales, but people are craving computers that make them more productive.

Steve Jobs ran a PC business and went after mobile. He even renamed the company from "Apple Computers". Apple needs to do this again, but that's probably not what you wanted to hear.
post #35 of 76
Quote:
Originally Posted by Rogifan View Post

When you get as big as Apple is how do you do that? Law of large numbers come into play.
You go after a bigger market. I have one word for you...no, not plastics...enterprise.
post #36 of 76
Quote:
Originally Posted by ifij775 View Post


I am in no way suggesting Samsung's version of "innovation" or even Google's throw crap against the wall and see what sticks. I don't think Apple needs 12 different phones. I think they need to go after new markets. Dare I suggest an enterprise strategy? Companies can appreciate paying more for a better product. How does Apple ignore this segment? FaceTime is not an enterprise video conferencing solution. No screen sharing, note taking, recording, etc. How about the fact that probably about 50% of all meetings (WAG) are ruined by people being unable to hook their computer to a projector instantly. Could AppleTV solve this? Absolutely. Is this a risky bet? Sure, Microsoft dominates enterprise sales, but people are craving computers that make them more productive.

Steve Jobs ran a PC business and went after mobile. He even renamed the company from "Apple Computers". Apple needs to do this again, but that's probably not what you wanted to hear.


It's happening already. All will be well, when the other shoe (patent) drops.

post #37 of 76
Quote:
Originally Posted by AppleInsider View Post

This week, Apple announced plans to change the way it outlines guidance, an effort apparently intended to thwart excessively enthusiastic analyst expectations that have resulted in a series of "misses" ultimately blamed upon the company itself.

Raising the bar too high



On the contrary, Apple's consistent ability to exceed its stated guidance objectives has resulted in analysts setting their own expectations for the company, at a level significantly above what Apple has stated it is reasonably confident that it can achieve.



Following the announcement, a research note by J.P. Morgan analyst Mark Moskowitz observed, "we think the new guidance commentary is not much of a change and could restore beat-and-raise potential to the model."



 

While Apple certainly benefits from providing conservative guidance it can be fully confident about delivering, it would be absurd to suggest the company is attempting to hustle the market over the long term in a series of quarterly guidance "sandbagging," any more than card shark could repeatedly fool the same naive players to bet against it after a series of expert hands of card playing.

 

Nice article, and pretty accurately describes the situation.  I think the new guidance by Apple is a good thing- but it really puts the burden on Apple to post realistic numbers instead of its past practice of posting fictitiously low numbers.

 

Apple would historically post very low expectations.  That way they could get the 'TA-DA' effect and bask in the glory of 'Apple beats expetations again!' headlines.  If they were going to release a new product they knew was going to do tremendously, they would not build it into their expectations and instead just drop it on the market and grossly (and knowingly) exceed their own lowball expectations....  "Apple hits ANOTHER home run out of the blue!"

 

Apple had no problem taking full credit and I didn't see alot of investors here complaining about analysts back then...  They were too busy jumping on the Apple is great, buy their shares, they are going to do great forever and ever and we're all going to get infinity rich by investing in them.

 

That is usually a good sign that it is time to get out of a stock.

 

The big kids (instutionals, hedges, etc) know this game and hate it.  They hire people and pay them a lot of dough to, 'analyse this stock and tell us what its *really* worth'  Well, we know Apple consistently lies on the low side under normal circumstances, and lies extremely when they release new products by not including them estimates conservatively.  Based on their past performance their real value should be $n.  n is much higher than Apple's 'best guess'  Apple hits $n.  Analysts: okay we've figured this out.  Next quarter Apple will be $y.   Apple jumps out of the woodwork and hits yet *another* unexpected home run.  Apple does have awesome products and great ideas =)  Analysts are off low again.  *$#&#@*# Apple, why can't they just post real numbers instead of fictitious ones.  They keep doing this over and over and over again. hmmmm....  I know, we should come to expect it and build it into the stock price!

 

And there you have it.  With Apple growing as large as it has with its past products, building that next home run into their valuation was a killer.  Since the home run was now built into Apples value, they tanked by not hitting it.  Keep in mind that it is not 'analysts driving shares down!'  The problem is that they drove the stock price up far too high beyond Apples true value.  Apples real numbers did not support that valuation and its value plumetted.  Apple loves the glory on they way up, but is happy to 'blame analysts' on the way down. 

 

The new guidance rules, could, in theory make Apples stock price more realistic and reduce fluctuations.  The key is going to be for Apple to post real expectations on both the high and low side.  If they *ever* beat their own 'high' guidance this cycle is just going to repeat as analysts will just be forced to 'guess high again, because we know Apple is lying to us'  I think 'no surprises' is going to be a tough challenge for Apple.  If they plan on releasing that watch, or TV, or super-secret-x, they will have market estimates and they will have to build that into their 'high end' expectations.  If they just dump it on the market and go for another 'ta da' stock jump, well, I guess the above suggestion of sandbagging will be proven true, Apple will be back to its 'beat-and-raise' model, and that will leave AI as having effectively called Apple investors as 'naive players getting hustled again'

post #38 of 76
One thing I haven't seen mentioned lately is all the insider selling that occurred in November and December. There are many reasons to sell...taxes, need money for new house, belief stock price rose too far too fast and will sink when the company misses analysts' expectations at the next earnings call, etc. Most commenters on here assumed it was because of taxes. Perhaps that assumption was incorrect.
post #39 of 76
Quote:
Originally Posted by robogobo View Post

This whole thing is totally F'd. A company offering guidance is never a guarantee. The market is talking as if Apple is being deceptive, as if they somehow know they'll beat their guidance via crystal ball soothsaying. Analysts habitual inflating of expectations strictly off Apple's numbers is a set-up.

So now the market expects Apple to inflate its own expectations in order to join the ranks of idiot analysts who don't know how to put their own accurate numbers together. Then they'll miss their own numbers and what - everyone will be happy and buy? Bullshit.

This whole thing sticks of an ambush, and lots of people are getting rich off it.

I agree. In fact, people are even saying that Apple is lying when they post their conservative guidance (see below, for example).
Quote:
Originally Posted by Frood View Post

Nice article, and pretty accurately describes the situation.  I think the new guidance by Apple is a good thing- but it really puts the burden on Apple to post realistic numbers instead of its past practice of posting fictitiously low numbers.

Apple would historically post very low expectations.  That way they could get the 'TA-DA' effect and bask in the glory of 'Apple beats expetations again!' headlines.  If they were going to release a new product they knew was going to do tremendously, they would not build it into their expectations and instead just drop it on the market and grossly (and knowingly) exceed their own lowball expectations....  "Apple hits ANOTHER home run out of the blue!"

Apple had no problem taking full credit and I didn't see alot of investors here complaining about analysts back then...  They were too busy jumping on the Apple is great, buy their shares, they are going to do great forever and ever and we're all going to get infinity rich by investing in them.

That is usually a good sign that it is time to get out of a stock.

The big kids (instutionals, hedges, etc) know this game and hate it.  They hire people and pay them a lot of dough to, 'analyse this stock and tell us what its *really* worth'  Well, we know Apple consistently lies on the low side under normal circumstances, and lies extremely when they release new products by not including them[/S] estimates conservatively.  Based on their past performance their real value should be $n.  n is much higher than Apple's 'best guess'  Apple hits $n.  Analysts: okay we've figured this out.  Next quarter Apple will be $y.   Apple jumps out of the woodwork and hits yet *another* unexpected home run.  Apple does have awesome products and great ideas =)  Analysts are off low again.  *$#@*# Apple, why can't they just post real numbers instead of fictitious ones.  They keep doing this over and over and over again. hmmmm....  I know, we should come to expect it and build it into the stock price!

Frankly, you don't know what you're talking about. Offering conservative guidance is not a lie, nor is it misleading nor fictitiously low as you claim. Apple was clear what their numbers meant - they gave numbers that were numbers that they felt confident that they could meet. They were not expectations, nor were they meant to be Apple's maximum numbers. As stated, they were essentially the minimum numbers that Apple felt confident of.

Did Apple consistently beat their numbers? Yes. But for a long stretch, Apple was consistently beating the numbers by 10-15% but the analysts were throwing out projections that were 30-40% above guidance. That is not Apple's fault, it is pure guesswork on the part of the analysts - and they are the ones who should be getting the blame.

What happens if Apple switches their guidance numbers to "our most likely estimate of profit"? On average, they will beat it some quarters and fall short some quarters. And Wall Street hammers Apple so hard if they ever miss a target that Apple doesn't want that to happen. That's why they offer conservative guidance in the first place.
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
Reply
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
Reply
post #40 of 76
Originally Posted by msuberly View Post
Most commenters on here assumed it was because of taxes. Perhaps that assumption was incorrect.

 

Nah, it was the taxes.

Originally Posted by helia

I can break your arm if I apply enough force, but in normal handshaking this won't happen ever.
Reply

Originally Posted by helia

I can break your arm if I apply enough force, but in normal handshaking this won't happen ever.
Reply
New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: AAPL Investors
AppleInsider › Forums › Investors › AAPL Investors › Apple shifting its guidance to stop being blamed for "missing" analyst expectations