My Earnings Prediction Beat the Crap Out of the Analysts!!!

in General Discussion edited January 2014
Bullish Cross Beats the Street in Predicting Apple?s Second Quarter Earnings Results

Saturday, May 3, 2008

In early April, Bullish Cross offered its own earnings forecasts and estimates for Apple's (Nasdaq: AAPL) 2008 fiscal second quarter reported on April 23, 2008. Bullish Cross is proud to report that its forecasts generally beat the street, and several of its prominent financial analysts in giving one of the most accurate earnings predictions on Wall Street.

Comparison between Bullish Cross & Wall Street Firms

(Best Estimate Highlighted in Blue; Worst Highlighted in Red)

Apple, Inc. Actual Earnings

Revenue: $7.512b

EPS: $1.16

Gross Margin: 32.9%

iPhones: 1.703m

iPods: 10.644m

Macs: 2.289m

Andy Zaky, Bullish Cross

Revenue: $7.449b

EPS: $1.31

Gross Margin: 36.0%

iPhones: 1.700m

iPods: 10.5m

Macs: 2.350m

Gene Munster, Piper Jaffray

Revenue: $6.900b

EPS: $1.19

Gross Margin: 36.0%

iPhones: 1.6-2.0m

iPods: 10.5m

Macs: 2.100m

Shaw Wu, AmTech

Revenue: $7.000b

EPS: $1.10

Gross Margin: 33.5%

iPhones: 1.5m

iPods: 10m

Macs: 2.150m

Richard Gardner, Citigroup

Revenue: $7.000b

EPS: $1.23

Gross Margin: 36.5%

iPhones: 1.5m

iPods: 9.5m

Macs: 2.100m

Ben Reitzes, Lehman Bros.

Revenue: $6.950b

EPS: $1.05

Gross Margin: 33.2%

iPhones: 1.5m

iPods: 10.3m

Macs: 2.090m

Mike Abramsky, RBC Capt.

Revenue: $7.200b

EPS: $1.11

Gross Margin: 34.0%

iPhones: 1.8m

iPods: 10.0m

Macs: 2.200m

Katy Huberty, Morgan Stan.

Revenue: $6.634b

EPS: $1.10

Gross Margin: 35.8%

iPhones: 1.0m

iPods: 8.5m

Macs: 2.020m

Scott Craig, BofA

Revenue: $6.900b

EPS: $1.07

Gross Margin: n/a

iPhones: 1.22m

iPods: 10.0m

Macs: 2.021m

As noted in the table above, Bullish Cross beat Wall Street analysts in predicting Apple's second quarter earnings results almost across the board. In terms of revenue, Bullish Cross made the best call in forecasting $7.449 billion - a mere 63 million or 0.8% within the actual numbers. The next best analyst, Mike Abramsky, forecasted $7.2 billion - a $312 million or 4.1% miss. By far the worst call on Wall Street came from none other than Katy Huberty of Morgan Stanley who's revenue estimates missed the number by almost a cool billion. She estimated sales of $6.634 billion and Apple reported $7.512 billion or nearly $878 million (11.7%) above Ms. Huberty's estimates.

Gene Munster of Piper Jaffray made the best call in predicting EPS. Though, with a little luck at his side. Munster was looking for 36% in gross margins and $6.9 billion in revenue to help him reach his $1.19 in EPS. Yet, Apple reported nowhere close to either $6.9 billion or 36% in gross margins. Munster was lucky in calling EPS because his revenue estimates were $612 million below what Apple actually reported. Under those circumstances, one's EPS estimates would normally miss as well.

Ben Reitzes wins in calling gross margins but misses big time in both EPS and revenue estimates. How Reitzes made such a call in gross margins is anyone's guess as I noted extensively above. Maybe he estimated gross margins in the same way he estimated revenue and EPS. By sheer dumb luck. His estimates missed revenue by $562 million - that's more than 1/2 billion!

Andy Zaky of Bullish Cross wins in calling iPhone unit sales. Bullish Cross estimated 1.7 million units and Apple reported unit sales of 1.703 million units. The next best call was by RBC Capital analyst Mike Abramsky who's estimates missed by 100,000. Yet, worthy of note is the idiotic call made by Katy Huberty of Morgan Stanley. She estimated that Apple would only sell 1 million iPhone units on the quarter despite the fact that Steve Jobs, during MacWorld, all but admitted that Apple sold 300,000 iPhones in the first two weeks of the quarter! This suggests that Apple enjoyed a run-rate of nearly 150,000 units a week. According to Katy Huberty, either Apple's iPhone run-rate should have dramatically collapsed during the quarter or Apple's quarter should have had a duration 6.5 weeks or 1.5 months. Still, I have to hand it to Morgan Stanely for indefatigably continuing to employ Ms. Huberty despite her clear and obvious shortcoming as a financial analyst.

Andy Zaky of Bullish Cross and Gene Munster of Piper Jaffray made the best calls in estimating total iPod unit sales. Yet, I think credit should go to Gene Munster as Bullish Cross' estimates of iPod unit sales generally track Gene Munster's estimates based on his readings of NPD data. I note in a previous artical how Gene Munster has been unusally accurate in being able to predict Apple's iPod unit sales. Both Gene Munster and I were looking for 10.5 million iPod units and Apple reported 10.644 million. Ms. Huberty, once again, demonstrated her shrewdness as an analyst with her great call of estimating sales of 8.5 million iPod units - she only missed by 2.1 million units (being facetious). Why anyone should listen to word Katy Huberty says is beyond me.

Andy Zaky of Bullish Cross made the best call in estimating total Mac sales. Bullish Cross estimated sales of 2.350 million Macs and Apple reported sales of 2.289 million macs - that's a 61,000 unit difference or about 2.4 days of sales as noted above. The next best call came from Mike Abramsky of RBC Capital who estimated unit sales of 2.2 million macs or nearly 89,000 units below what Apple actually reported. The worst call obviously came from none other than Katy Huberty of Morgan Stanley. She continues to impress with her estimates. Katy Huberty estimated unit sales of 2.020 million Macs, missing estimates by a full 269,000 Macs! If I were running things at Morgan Stanley, I would consider firing Ms. Huberty. That's a recommendation. Finally, it's intersting to note that Morgan Stanley made the worst call in four out of the six categories and Bullish Cross made the best call in four out of the six categories.

Disclosure: I own long term 2009 and 2010 call options in Apple. The information contained in this blog is not to be taken as either an investment or trading recommendation, and serious traders or investors should consult with their own professional financial advisors before acting on any thoughts expressed in this publication.

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