Why Wall Street Is Being Totally Idiotic About Apple’s Fortunes Right Now

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Earlier today, we reported that the Wall Street consensus was that Apple’s profit in this last quarter probably shrank for the first time in a decade, and that results will be even more dire next quarter, with iPhone sales units being extremely low.

But Wall Street’s pessimism in regards to Apple is, as usual, nuts. For Apple to perform as low as Wall Street thinks it will next quarter, Apple would have to show zero growth in the iPhone market compared to the same spring quarter a year ago. This would rank it as one of the smartphone industry’s worst disasters ever. Which is crazy, because Apple’s selling more iPhones than ever.

In a thoughtful piece on Wall Street skepticism over at BGR, the absurdity of Wall Street’s negativity is well spelled out: for Apple to do as poorly this quarter as Wall Street anticipates, it would need zero volume growth during a time in which smartphone shipments have soared by 30% year-over-year.

It’s seemingly impossible that this could happen, and as BGR spells out, the only way it could happen at all would be catastrophic mis-management of Apple’s brand… something there are no indications is actually happening.

Looking at the worst debacles in the handset industry history, Motorola’s RAZR bust stands as perhaps the best-known example of disastrous mismanagement of a brand. Motorola delivered extraordinary growth of its RAZR model range in 2005 and 2006, strip-mining the franchise and degrading the premium brand by dropping pricing too rapidly. Then followed the epic bust of 2007. Motorola shipped 40.9 million phones in the Christmas quarter of 2007, down 37.7% from Christmas of 2006.

Another spectacular blow-up happened in 2011. Nokia’s new CEO blurted out in February that he intended to phase out the Symbian OS rapidly, strongly implying that it was an uncompetitive mess. Nokia’s smartphone sales started tanking immediately, resulting in Christmas 2011 smartphone volumes coming in 31% lower than in Christmas 2010.

In other words, what goes down must go up. Wall Street pessimism has reached such an extent that Apple soon won’t be able to help outperforming the Street. Let’s hope, when that happens, Wall Street get bullish again on AAPL.

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  • Steffen Jobbs

    Wall Street has been idiotic about Apple’s fortunes for years. Consider Apple’s rapidly dropping P/E ratio. Who’d ever think that Apple is a successful tech company with a P/E of 8.x. It looks as though Apple hasn’t done a damn thing in years or the company has no future beyond the next few months. Apple is the polar opposite of Amazon, the company with the world’s brightest future on Wall Street. Wall Street is basically saying that Amazon will be a huge future success beyond all means and Apple will be the biggest failure with nearly no success. That’s the sort of confidence investors have in Apple.

    As far as Wall Street is concerned, in two years Apple will be selling about twenty million iPhones a quarter and all the Android companies will be selling about 200 million smartphones a quarter. Wall Street totally believes Android will destroy Apple’s smartphone business and they’re all getting out now before they lose any more money. They say that Tim Cook has no control over that. I wonder. It seems as though Jeff Bezos can convince investors that Amazon will be the biggest retailer in a few years and everyone believes him.

  • lwdesign1

    This may have an up-side: Consider that analysts chastise Apple when Apple doesn’t make what the analysts think they should. This time the analysts are prophesizing low expectations, so when Apple’s sales become public they will be far higher than predicted, which could lead to a jump in stock price. There has been so much bad press on Apple (completely unwarranted) which is having a huge depressing affect on the stock price. All of a sudden the press will turn around saying how great Apple is, and all the people in the know who bought Apple at $400 will make all kinds of money. It’s called stock manipulation and it happens all the time.

  • HerbalEd

    Wall street’s and big speculators’ predictions of Apple’s doom is a self-fulfilling prophesy and has little to do with reality. Unfortunately, as the say, perception is reality.

About the author

John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.

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