The Problem with Analysts...
22/01/13 17:33 Filed in: Apple | Financial Results
It was about 17 years ago when we we looked at investing in Apple stock. I walked into a branch of NatWest in Bristol and asked about buying a small number of shares, as I had seen the stock price begin to rise. This was 1998 and it was just after Apple had turned the corner with its results. Steve Jobs was back as CEO and the new iMac had launched. However on the day the bank explaining that I would need a trading account and various forms of documentation, none of which I had expected or had to hand and so I put my plans on hold for a while. Needless to say I never got any further with this.
Now all those years later ti would have been a great bet, but it still shows that this would have been nothing to do with any of my skills. It would have been down to two things- Apple’s performance and the whim of the markets.
Which brings us to the latter. In recent months the rumours which have emerged about Apple have swung from the possible (the best you can hope for with a rumour) to the down right ridiculous. Suggestions that Apple absolutely must produce a TV set, have to start selling a cheaper iPhone, need a new Maps and iOS, surely must produce a cheaper Mac, all lead to one conclusion- the majority of analysts know precious little about Apple Inc, its products and its business strategy.
Trading in Apple shares in recent times is a bit like joining a bus load of drunks; it could go well and there could be merit in their behaviour, but the element of unpredictability may lead to disaster. Everyone wants to give directions, everyone thinks thy are right, but you can be sure that fact and considered thought is very, very rare.
And so we approach Apple’s results tomorrow, which will bring another top set of profits and revenues. But this may not be enough for the financial drunks. They need bigger, better, greater and the slightest slip in figures will bring the headlines of doom and disaster. So as a way to see through the fog, here is what we are likely to get from Apple and why, a simple process for people who know Apple and have followed their financial record over the last decade:
iPods: the iPod figures have been declining for some time now. Why? Because the iPhone is part iPod, part phone, part internet device. This means that the iPod is no longer the must have device. Sales are still good, but not as high as they were in the last decade as people now want iPhones and iPads instead. So expect sales to be good, but they will have declined on last year’s numbers.
iPhone: despite all of the nonsense which has been reported about the iPhone in recent weeks such as Apple halving their orders for displays, the iPhone 5 is set to be Apple most successful iPhone yet. It was the biggest seller in the first few weeks of sales, beating the iPhone 4S’ record numbers, and this is likely to continue. The figures tomorrow will though show some differences. For example, Apple could not produce the iPhone 5 fast enough to satisfy demand and so it took a few weeks at the start of the quarter to get phones into the hands of customers. Therefore the inflated guestimates from some analysts may be too high.
Macs: we feel that while laptops sales will be good, the last revision was in the summer, and the only new laptop since then was the new 13” retina display model launched in October. The new iMac was also announced then, but did not ship until December and is still in short supply. Therefore we see Mac numbers falling behind, not because of lack of interest, but due to the iMac not being on sale during November.
iPads: these numbers should be good and it will be interesting to see what Apple say about the mini. It may be that the iPad 4 did not boost the larger iPad numbers as much as it may have if the iPad mini was not launched at the same time. Many people may have bought minis for Christmas instead as they preferred the form factor. But overall iPad numbers should set a new record for Apple.
Let’s then see what happens. The Apple conference call starts tomorrow night at 5pm EST and is available at this address. Just watch out for those analysts on TV and in the press, armed with their drunken numbers.
Now all those years later ti would have been a great bet, but it still shows that this would have been nothing to do with any of my skills. It would have been down to two things- Apple’s performance and the whim of the markets.
Which brings us to the latter. In recent months the rumours which have emerged about Apple have swung from the possible (the best you can hope for with a rumour) to the down right ridiculous. Suggestions that Apple absolutely must produce a TV set, have to start selling a cheaper iPhone, need a new Maps and iOS, surely must produce a cheaper Mac, all lead to one conclusion- the majority of analysts know precious little about Apple Inc, its products and its business strategy.
Trading in Apple shares in recent times is a bit like joining a bus load of drunks; it could go well and there could be merit in their behaviour, but the element of unpredictability may lead to disaster. Everyone wants to give directions, everyone thinks thy are right, but you can be sure that fact and considered thought is very, very rare.
And so we approach Apple’s results tomorrow, which will bring another top set of profits and revenues. But this may not be enough for the financial drunks. They need bigger, better, greater and the slightest slip in figures will bring the headlines of doom and disaster. So as a way to see through the fog, here is what we are likely to get from Apple and why, a simple process for people who know Apple and have followed their financial record over the last decade:
iPods: the iPod figures have been declining for some time now. Why? Because the iPhone is part iPod, part phone, part internet device. This means that the iPod is no longer the must have device. Sales are still good, but not as high as they were in the last decade as people now want iPhones and iPads instead. So expect sales to be good, but they will have declined on last year’s numbers.
iPhone: despite all of the nonsense which has been reported about the iPhone in recent weeks such as Apple halving their orders for displays, the iPhone 5 is set to be Apple most successful iPhone yet. It was the biggest seller in the first few weeks of sales, beating the iPhone 4S’ record numbers, and this is likely to continue. The figures tomorrow will though show some differences. For example, Apple could not produce the iPhone 5 fast enough to satisfy demand and so it took a few weeks at the start of the quarter to get phones into the hands of customers. Therefore the inflated guestimates from some analysts may be too high.
Macs: we feel that while laptops sales will be good, the last revision was in the summer, and the only new laptop since then was the new 13” retina display model launched in October. The new iMac was also announced then, but did not ship until December and is still in short supply. Therefore we see Mac numbers falling behind, not because of lack of interest, but due to the iMac not being on sale during November.
iPads: these numbers should be good and it will be interesting to see what Apple say about the mini. It may be that the iPad 4 did not boost the larger iPad numbers as much as it may have if the iPad mini was not launched at the same time. Many people may have bought minis for Christmas instead as they preferred the form factor. But overall iPad numbers should set a new record for Apple.
Let’s then see what happens. The Apple conference call starts tomorrow night at 5pm EST and is available at this address. Just watch out for those analysts on TV and in the press, armed with their drunken numbers.
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