Originally Posted by jragosta
I agree. In fact, people are even saying that Apple is lying when they post their conservative guidance (see below, for example).
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.
Not really true. Apple posted its 'conservative numbers' which everyone knew weren't near reality. Analysts would exceed those numbers by a wide marge- but still be outrageously low. Apple would consistently exceed even those numbers and bask in the headlines. Analysts were even getting accused of willingly 'playing along' with Apple by knowingly lowballing so they could make an inside fortune every time Apple posted results.
I don't normally rely on Fox, but Fox business is actually fairly decent. When even an organization as Business friendly and coservative of Fox starts calling a companies estimates fictitious and warning investors- there just might be something to it. Note also the date is well before the current Shenanigans and analysts are getting beat up for giving 'unreasonably low' expectations lol.
So analysts were getting heat for consistently low-balling Apple and being corrupt for taking profits knowing Apple would 'exceed.' They were pretty much forced to up their estimates. That drove Apples valuation through the roof. If you came to this site and pointed that out, you'd get roasted for being an Apple hater. With so many people loving Apple so much, they were more than happy to believe the hype and bought in.
Ultimately its not the analysts that drive stock price. Investors buying and selling the stock drive the price. People have to buy into it.
Thats why I said I like Apples new guidance policy. They are giving a range instead of a point. So their low point can now be their historically low 'coservative estimate' which everyone knows they will beat by a mile. The key is they are now providing an optimistic high point. Its a double edged thing and that's the real test for Apple. If Apple ever exceeds its optimistic high point, its just back to its old shennanigans. If it is a true estimate, Apple should always be below it.
That makes valuation for their stocks a very easy thing.
Using easy numbers and assuming 0%interest and no currency fluctuations for NPV simplicity....
Apples low guidance:
We will sell 50,000,000 devices at $500 per device this quarter at a margin of of 40%.
We will sell 70,000,000 devices at $500 per device at a margin of 50%
That makes Apples valuation pretty straightforward:
50,000,000 x500 = 25,000,000,000 on the low side
70,000,000 x500 = 35,000,000,000 on the high side
25,000,000,000 x .4 = 10,000,000,000 on the low side
35,000,000,000 x.5 = 17,500,000,000 on the high side
Prior correct valuation was at 400,000,000,000.
So at the end of this quarter Apple is expected to worth $410,000,000,000 to 417,500,000,000
Assuming apple had 1,000,000,000 shares outstanding....
Current stock price - $400,000,000,000/1,000,000,000 = $400
Price expectation at end of quarter = Between $410 to 417.5
It is nowhere near as sexy or exciting as posting lowball numbers and then being a 'miraculous' company that pulled a financial rabbit out of the hat and exceeded expectations yet again- but its an amazing thing for people that would prefer investing over gambling. As long as they keep selling more devices at higher margins their stock will very coninuously continue to climb along with their performance.
If Apple does what some of the analysts predicted- which is to give their outrageously low low number, and then give a 'high' number that they know they will beat as well.... Well, invest at your own risk.
Apple, thanks for making the reporting change, please continue to surprise us with your great products, not your financials.