Wednesday, January 12, 2005

Why street got AAPL estimates so wrong

Usually companies like to beat expectations by a penny or two even if they can do say four pennies, because they don't like uncertainty and they move shipments to next quarter for backup. AAPL on the other smacked one out of the ballpark and then some. AAPL beat EPS estimates by unheard of $0.29! Now what are the buy-siders paying for when the sell siders estimates are not even in the same time zone? AAPL reported $0.70 in earnings, did you know the street was looking for $0.60 next XMas and AAPL delivered better than that this Xmas.

The iPod brand has transformed itself into a eco-system and it's just very tough to get all the variables right when a product becomes a "economy" by itself. The iPod has been one of the best marketing blitz in AAPL history or for that matter in consumer technology and it does not matter how many channel checks you do, how closely you monitor the food-chain, it is just going to be very tough to get this cultural phenomena down to a number. So cut sell siders a break and watch for the next iPod-like product because this cycle will be repeated.

No I am not a sell sider who covers AAPL.

4 Comments:

Anonymous Anonymous said...

Interesting that the stock hasn't moved much considering how big they blew out numbers by. Yes, it had a big run since August, but it was consolidating in the mid-60s for over a month.

Jake

10:40 PM  
Blogger Slash said...

Certainly not as much as it did since August. They reported on Jan12 and since then the stock is up 10% where as the Nasdaq is basically unchanged.

8:10 PM  
Anonymous Anonymous said...

True, APPL is certainly outperforming for good reason. I meant to say it's a bad sign for the Nazz that a blowout quarter from AAPL couldn't ignite the market and couldn't even really ignite its own stock.

Jake

11:01 PM  
Blogger Brian Shiau said...

I think this recent earnings report from Apple was very interesting. Part of the reason analysts came in low was that they priced in a lot of risk on Mac sales. When Steve Jobs announced that Apple had sold 4.5 million iPods that quarter, many analysts thought this was too low and many people started selling AAPL because they thought AAPL could not meet or beat estimates with only 4.5 million iPods when some were expecting 5 million. What happened was Apple beat on Mac sales. Even despite less than best expectations for iPods, Apple blew away all expectations of net income because the more profitable Mac computers sold better than analysts expected (not necessarily their fault because the new iMac was not a proven seller).

IMO, AAPL failed to explode like it had in the past because the iPod Shuffle and Mac Mini announced that week also appeared very risky. People were uncertain if a flash player with no screen would sell or a Mac Mini which at first glance doesn't seem like a great deal compared to a $450 Dell computer would sell. I think much of that risk has been reduced from what we can gather from initial sales that these two products will not be failures and the stock will continue to appreciate.

I write a tech stock blog with a particular focus on Apple. I wrote pretty extensively on all these issues. I welcome you to check it out at http://www.ShiauStreet.com

4:06 PM  

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