Apple Analysts Are Crying Wolf (Again)Reading Time: 8 minutes
There’s a whining at the threshold,
There’s a scratching at the floor,
To work! To work! In Heaven’s name!
The wolf is at the door!
~ All Apple Analysts Everywhere ((No, seriously, it was written by Charlotte Perkins Gilman, In This Our World ))
In “The Shepherd’s Boy”, Aesop provided us with a wonderful fable about a boy who repeatedly cried wolf because he wanted to draw attention to himself. The moral of the story was that an alarmist might be believed once, perhaps twice, but then they would never be trusted again.
Wow, was Aesop ever wrong. If you’re an Apple analyst, you can cry wolf time and time again and each and every time, Wall Street investors will react like a flock of frightened sheep.
iPhone Sales May Be Slowing
It was the best of times, it was the worst of times. Apple just had its best year ever so, by employing some sort of perverse logic, many Apple analysts have concluded it is only logical to assume Apple must now have its worst year ever.
But hold on to your hat, there’s more logic where that came from! Not only is Apple going to have a bad quarter — which inevitably means they’re going to have a bad year — but…wait for it… it also means Apple is — dun, dun, dun — doomed!
No, seriously, an Apple analyst is literally predicting Apple is doomed.
The iPhone slowdown spells doom for Apple. ~ Jeff Reeves, MarketWatch, January 9, 2016
With all due respect, it’s pretty obvious Jeff Reeves doesn’t know how to spell.
Nature, not content with denying him the ability to think, has endowed him with the ability to write. ~ A. E. Housman
And what is triggering this coming Apple apocalypse? Why a single quarter of flat or decreasing iPhone sales, that’s what.
And what are all these gloom and doom predictions of lowered iPhone sales predicated upon?
Year after year after year, channel checks have proven to be an unreliable way to gauge future sales of Apple products. But year after year after year, the cry of “channel checks” — like the cry of wolf — fills the hearts of Apple investors with dread.
I’ve been following tech for 15 years and am still startled how a random, flakey estimate can become accepted Truth in 24 hours.” ~ Benedict Evans on Twitter
Déjà Vu All Over Again ((Attributed to Yogi Berra.))
It’s not like this is anything new. People have been predicting doom for the iPhone since its inception.
The market is already saturated with popular [phones] that are virtually free to consumers. … The old iPod magic doesn’t translate (to) the iPhone. ~ Ashok Kumar, Capital Group, 30 July 2007
There is no doubt, in my mind, that the whole (smartphone) sector is hugely overstretched. The whole sector is priced as if the average player would sustain 25 per cent margin in eternity. It’s bordering on absurdity. This will end in tears. ~ Per Lindberg, MF Global Ltd, Feb 2009
Tears, perhaps. But Apple cried all the way to the bank ((I cried all the way to the bank. ~ Liberace)) . Lindberg was right when he predicted Apple wouldn’t be able to sustain 25 per cent margins. It was more like 40 per cent.
When the iPhone came out, it was so far beyond what was out there on the market, pretty much up until now, but with what’s coming out from competitors, that advantage is going away. For the first time, Apple’s going to be faced with a serious growth challenge. ~ Edward Zabitsky, ACI Research, 22 Apr 2009
Everything Has To Decline
If you look at any institution in history – look at the Roman Empire – anything in history, and what it looks like when it’s peaking. Look at Apple, and how can you say it’s not peaking? (H)ow much better can it really get? The thing is, it may take another year or two before it starts to decline, but it has to – everything does. ~ Trip Hawkins, Founder and CEO of Digital Chocolate, 3 Aug 2011
The last quarter slowdown could be foreshadowing bigger issue to come for iPhone sales and mark a peak in the growth rate of the iPhone. ~ Charlie Zhou, Seeking Alpha, 31 August 2012
With all things tech, fused products and commoditization are inevitable markers of the product cycle. The iPhone 5 will be Apple’s last hurrah as competitors increasingly gain ground. ~ Kofi Bofah, Onyx Investments, 29 August 2012
Apple just reported that it sold more than 5 million iPhones over the iPhone 5′s opening weekend. This is a very disappointing number. It’s below top Apple analyst Gene Munster’s estimate of 6 million to 10 million. Worse, it indicates that growth may be slowing at Apple. Apple sold the iPhone 5 in nine countries over its opening weekend. It sold the iPhone 4S in seven. It actually sold fewer iPhones per country this year than the last. That’s not just deceleration, that’s shrinkage. ~ Nicholas Carlson, Business Insider, 24 Sep 2012
One thing Apple investors are waking up to, in other words, is that the iPhone’s amazing run is winding down. ~ Jay Yarow, Business Insider, 18 December 2012
There’s no way around it: The iPhone business as currently constructed is slowing down significantly. ~ Jay Yarow, Business Insider, 23 April 2013
Apple’s struggles with the iPhone 5 appeared just shortly after the phone’s launch. That event coincided almost perfectly with Apple’s all-time high. Although the iPhone 5 has sold well (it’s the world’s single best selling phone), it failed to live up to the expectations of optimistic Wall Street analysts. ~ Salvatore “Sam” Mattera, The Motley Fool, 9 July 2013
Sales Growth Slowing
Looking at the yearly trajectory, one can see how the rate of iPhone sales growth is slowing down.” ~ Sam Gustin, Time , 28 October 2013
Apple could be negatively impacted by slower growth in iPhone sales. In my opinion, the company cannot grow indefinitely in the smartphone market area and one day, it will materialize in its share price. ~ Gillian Mauyen, Seeking Alpha, 15 November 2013
Wow. Apple analysts cry wolf, wolf, wolf, wolf, wolf, wolf, wolf, wolf, wolf, wolf, wolf, wolf — with nary a wolf in sight. Yet now they expect us to take them seriously?
It is a mark of prudence never to trust wholly in those things which have once deceived us. ~ Descartes
Let’s face it, predicting the future is not Wall Street’s forte.
Economist Alfred Cowles dug through forecasts of popular analysts who “had gained a reputation for successful forecasting” made in The Wall Street Journal in the early 1900s. Among 90 predictions made over a 30-year period, exactly 45 were right and 45 were wrong. This is more common than you think. ~ Motley Fool
Wall Street indexes predicted nine out of the last five recessions. ~ Paul A. Samuelson
The phrase “double-dip recession” was mentioned 10.8 million times in 2010 and 2011, according to Google. It never came. There were virtually no mentions of “financial collapse” in 2006 and 2007. It did come. A similar story can be told virtually every year. ~ The MoneyGeek Unplugged
Investment bank Dresdner Kleinwort looked at analysts’ predictions of interest rates, and compared that with what interest rates actually did in hindsight. It found an almost perfect lag. “Analysts are terribly good at telling us what has just happened but of little use in telling us what is going to happen in the future,” the bank wrote. It’s common to confuse the rearview mirror for the windshield. ~ The Motley Fool
Stocks have reached what looks like a permanently high plateau. ~ Irving Fisher, Professor of Economics, Yale University, October 17, 1929
To be fair, just because the pundits have been wrong in the past, doesn’t mean they will be wrong this time around. I honestly don’t know how many iPhones Apple sold this past quarter. But here’s the thing: The pundits don’t know either.
In the case of news, we should always wait for the sacrament of confirmation. ~ Voltaire
Much Ado About Nothing
Everyone acknowledges iPhone sales were unexpectedly high this time last year. That creates what analysts call a “tough compare”. In other words, Apple is being punished this year for doing so well last year.
If Apple doesn’t beat last year’s iPhone sales, it doesn’t portend an inexorable downward sales spiral. Apple is the world’s biggest company, as measured by market value, with around $525 billion market cap ((Market cap is a constantly changing number. Jay Yarrow listed it at $565 billion in his article but as of January 20, 2016 it is around $525 billion)). It has $206 billion cash on hand. It had $13.5 billion in cash flow last quarter. It is expected to do $77 billion in sales this quarter. (Via Jay Yarrow, Apple is going to have a tough year – Business Insider.) Apple remains — despite all the current kerfuffle — the most profitable company in the S&P 500.
A bad year for Apple would be a great year for almost any other company. So is Apple doomed? Not so much.
Cause And Effect
We’ve got to disabuse ourselves of this notion that short-term stock fluctuations accurately reflect the long-term health of a company.
(Wall Street) focuses on the waves and not of the currents. ~ Consuelo Mack
The breaking of a wave cannot explain the whole sea. ~ Vladimir Nabokov
Wall Street likes to focus on the short-term.
If you heat your company by burning the furniture, Wall Street will adore you and write glowing articles about you but you’ll be cold soon. ~ Farooq Butt (@fmbutt)
but a good company must focus on the long term instead.
If you’re long-term oriented, customer interests and shareholder interests are aligned. ~ Jeff Bezos
Wall Street has cause and effect reversed. You can’t tell how good or bad a company will do by looking at its stock. But you can tell how good or bad its stock will do by looking at the company. Believing the direction of AAPL stock determines the direction of Apple is like believing a weathervane controls the direction of the wind.
Buy Low, Sell High
I thought the goal was to buy low and sell high. If so, this might be a good time to buy Apple stock rather than to sell it.
We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. ~ Warren Buffett
But what do I know about stocks? Not very much. But that Warren Buffett guy, he seems to know a thing or two.
If a business does well, the stock eventually follows. ~ Warren Buffett
Apple owns the high end in smartwatches, smartphones, tablets, notebooks and desktops. Seems to me, that’s a pretty good place to be.
Total Apple device shipments (iOS, WatchOS, TV, Mac) 2015 about 330.5 million. ~ Horace Dediu (@asymco) 1/14/16
The End (Or Is This Never Ending?)
Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market. ~ Warren Buffett
If you can’t tolerate fear-mongering, then you shouldn’t be in the stock market to begin with. Invest in something safer and more stable — like Syrian real estate.
“Apple is screwed” – 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015 [2016, 2017…. ~ Sammy the Walrus IV ((Sammy the Walrus is Neil Cybart’s nom de plume)) (@SammyWalrusIV)
It seems as though this has become an annual ((Semiannual? Quarterly? Daily?)) ritual. The naysayers keep crying “Wolf” and I keep responding “Bull”.
It’s always been easier to explain how Apple will fail than it is to explain how the company will succeed. ~ Neil Cybart on Twitter
If the cries of Apple’s doomsayers unnerve you, then get the hell out of Apple stock, because the FUD ((Fear, Uncertainty and Doubt)) is never going to end. Analysts are going to keep on crying “Wolf” and scared investors are going to keep on acting like sheep. Do yourself and Apple a favor. Get the flock out. Apple doesn’t want you as an investor anyway.
If you’re in Apple for only a week… or two months, I would encourage you not to invest in Apple. We are here for the long term. ~ Tim Cook
Apple is run ‘for the investors who are going to stay, not the ones who are going to leave.’ ~ Warren Buffett
Post Script — Just For Fun
A MAN STOMPS INTO A BAR, obviously angry.
He growls at the bartender, ‘Gimme a beer,’ takes a slug and shouts, ‘All financial advisers are arseholes!’
A bloke at the other end of the bar retorts, ‘Take that back!’
The angry man snarls, ‘Why? Are you a financial advisor?’
The bloke replies, ‘No, I’m an arsehole.’
(Just in case you’ve never read my bio, I was once a lawyer, but I didn’t feel that I was hated enough, so I became a financial advisor just in time for the collapse of the technology bubble in the year 2000.)