Apple shares tanking: Is it a victim of unsustainable expectations?

Have analysts and investors grown to expect too much from Apple?

“Sentiment has turned super-pessimistic on Apple, where they’ve gone from being able to do no wrong to suddenly being able to do no right,” said Rob Cihra, analyst at Evercore Partners, according to the New York Times. “I tend to think the company’s momentum is a heck of a lot more solid than people are concerned about.”

The Cupertino company’s market value was down about $50 billion this morning as shares plunged after brokerages left and right cut their price targets on the stock the day after Apple reported first-quarter numbers. Shares were down more than 10 percent to $461.10 as of this post.

Some of the company’s record first-quarter numbers missed Wall Street expectations. Apple posted profit of $13.81 a share on $54.5 billion in sales; one analysts poll expected $13.47 a share on $54.7 billion in revenue. The company sold 47.8 million iPhones, exceeding estimates of up to 47 million, but 22.9 million iPad sold fell short of 23 million to 24 million analysts expected, according to the Merc’s Pat May.

Is the Apple speculation game out of control, and can prognosticators be trusted? During Wednesday’s call with analysts, CEO Tim Cook addressed reports earlier this month that the company had cut orders for iPhone 5 components, which of course caused shares to fall: “I know there’s been lots of rumors about order cuts and so forth… the supply chain is very complex, and we obviously have multiple sources for things… I mean there’s just an inordinately long list of things that would make any single data point not a great proxy for what’s going on.”

But the company’s own projections confirm a momentum slowdown: It expects revenue to rise 7 percent in the current quarter, compared with the 18 percent rise during the first quarter, which included the holidays. Piper Jaffray analyst Gene Munster told the Wall Street Journal that iPhone growth failing to outperform the rest of the market is “confirmation of a trend” that industry growth is coming from emerging markets and cheaper phones. However, Cook said that the company saw its highest growth (“exceptional” for iPhones, he said) in China. The iPhone numbers are key because they represent half of Apple’s overall revenue.

So both projections and actual numbers are no longer blowing anyone away. The highest of highs can’t last forever, and perhaps Apple is becoming a victim of its own phenomenal success. The NYT points out that A. M. Sacconaghi, an analyst at Bernstein Research, recently calculated that if Apple were to grow for the next five years at the same rate as the past five years, its revenue would be $1.2 trillion.

 

 

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  • I guess with all this *media pressure* for stocks to perform every day at their maximum, Apple will have to succumb and lower their standards, start making batteries that charge only 100 times instead of 1000 times etc., so they can maximize those stock prices. Well, if they do that’s OK – it just opens an opportunity for someone else to move in and eat their lunch.

  • RedRat

    Maybe the folks at Apple might want to go back and read that old fairy tale about the Emperor with no cloths. Just maybe, many of those Apple fan-boys are getting tired of being jerked around every year or so with some minor mod to their toys but being charged an arm and a leg. Maybe, Apple has peaked and the other companies out there are catching up with them, making better products that do more for less money?

  • sd

    Analyst behavior like this really makes you wonder. So Apple sold one half of one percent fewer iPads than someone (Apple?) predicted and the stock price needs to get trashed? The Apple TV (or whatever The Next Big Thing From Apple) is later than analysts expect and the stock is worth so much less?

    The stock market is going to have to get used to the idea that, after the Wall Street meltdown that caused The Great Recession and went unpunished, and with the continued exodus of jobs and services that quarterly/monthly/daily earnings reports have spawned, the amount of money consumers have to serially-upgrade their iDevices is limited.

    And those markets are approaching saturation anyway. Everyone who ever wanted an iPod likely has one; after several generations of iPhone, it’s no surprise that most who really want one have bought one (or two or three). Generations of electronic devices (Apple’s and other companies’) are filling landfills.

    The whole consumer-driven economy cannot continually reach higher heights. The sooner Wall Street quits rewarding endless purchasing and faked obsolescence, the better off we’ll all be.

  • With sales and earnings and growth tossed to the winds of worry, there seems to be no numbers that will generate a story other than “Apple is weakening.” Not an increase in profits to a record level, or a jump in revenues to the same. iPad sales, at 22.9 million, were just 100,000 tablets short of the analyst estimates. This is called a “miss,” even while the sales outstripped every other tablet 2:1.

    The coverage is being couched in terms of analyst estimates, and they need to protect their “phoney-baloney jobs,” as Mel Blanc’s Governor said in Blazing Saddles. Today’s fallout from the wiseguys’ reports were great news for the analyst clients who want to climb on board the stock at $450, I suppose. There’s been too much hype to withstand the “knock-em-down” counterpunch that always follows a brilliant run-up of anything.

    Apple beat estimates for profits — the element that affects the future for users of its products — by 26 cents per share. That’s nearly a quarter-billion dollars extra in earnings the analysts didn’t expect. Still a stock to sell, apparently.

    Question for the crowd: How can Apple rake in the biggest share of the world’s smartphone profits and still be branded a weakened mobile company? Extra slices of analyst baloney, anyone?

  • tom allen

    Notice that *every* apple iPad ad is pushing for a second device. Everyone who wants one already has one.

  • Markus Unread

    “Sentiment has turned super-pessimistic on Apple, where they’ve gone from being able to do no wrong to suddenly being able to do no right,”

    The Stock Market is bipolar and unmedicated.
    Let it run your company – into the ground.

 
 
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