01/18/2006, 6:55pm, EST
Wednesday, January 18th
AAPL drops on lower forecast for Q2
"Their guidance being overly conservative for next quarter, that's what's causing the most chaos in the shares today," said Jim Grossman, portfolio manager at the Thrivent Technology Fund. "People want a little more explanation of why they're giving such conservative guidance."
Apple's success, focused much on the iPod and iTunes Music Store, may have distracted investors from its core business: the Mac, which is in the middle of a large-scale shift to new Intel processors and faces challenges.
"Historically the Mac has been the primary revenue generator," said Nittin Gupta, an analyst with the Yankee Group. "At this rate of growth, the Mac is not going to be their primary revenue driver. If they become too dependent on iPods and digital audio players, that's a risk over the long term. It's going to be hard to maintain those iPod shipment numbers."
Apple shares fell $2.22, or 2.6 percent, to close at $82.49, following disappointing results by Intel (and Yahoo!) on Tuesday. In after-hours trading, Apple stock fell below $78 before rebounding to $79.71, a drop of 3 percent since its close for the day.
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Analysts try to second guess Apple, and offer their own forecasts, which end up being, almost always, dead wrong.
Apple is being chastised for making too conservative forecasts, but if Apple were making more aggressive forecasts, and missing them, they would get picked apart by these same analysts.
Yet, meeting the forecasts they provide, and sometimes going beyond them, is a bad thing, somehow, in this world.
I'd say "Keep doing what you're doing, Apple!"
Now, since all analysts know this, they of course are going to try to predict what a company's actual earnings are going to be. Then they also come out with what they're really expecting (the 'whisper' number), which is what most stocks end up being valued at.
So, if Apple predicts 59 cents, and analysts average out at 61 cents, but whispers (hopes, if you will) say 67 cents, then of course the price will drop, because people bought on the hope of 67 cents, not 61 or 65 or 59.
Also, I don't think Apple's numbers are 'right on', since they beat their own estimates.
Finally, the reason they want to look at Q2 is to know why its so low, not that its low. But, beyond that, Q1 is behind us now, so who cares if they broke expectations. Its all a matter of what is the stock going to do in the next three months, which is dependent on what the company does. If they only plan on earning .42 cents a share, why shouldn't the price of the stock go down?