UPDATE: Apple’s stock is being punished because of concerns about Steve Jobs’ health, plus the company’s cautious guidance about Q4. Jobs didn’t participate in the earnings call, leading analysts to ask whether he is OK. Apple CFO, Peter Oppenheimer dodged the question. As Wired.com reports: “Andy Hargreaves, consumer electronics analyst at Pacific Crest Securities, said the lack of response from Oppenheimer regarding Jobs’ health only adds to investors’ doubt. “Not addressing Steve Jobs’ health perpetuates the fear that it’s a real problem,” Hargreaves said.”
Well, Apple just had another record quarter, with earnings jumping by 31 percent and revenue by 38 percent. The company sold more Macs in the third quarter than it has at any point in company history. It is performing better as a company than it ever has, and in a down economy.
So how does Wall Street respond? By knocking the stock price down by more than 10 points. Why? Because Apple’s guidance, or “made-up numbers to please whiny Wall Street analysts,” is below where the analysts believe it should be. Now, this might seem like rational behavior. If Apple is below Street consensus, the company must be headed for unanticipated trouble, right?
No. Not at all. Apple always sets expectations low and then jumps way beyond them. Take this quarter. Apple set earnings guidance at $1 per share. Analysts pegged it at $1.10 per share. Instead, they managed $1.19 per share. And the same thing keeps happening as far back as you can look. As Andy Zaky notes, Apple does this all the time, and they always beat their own guidance and the Street consensus, too. It’s just how they roll.
So why is it obvious to everyone except Wall Street traders that Apple always understates its guidance? Power is one hell of a drug, I imagine.
Picture via Imageshack
Pete Mortensen is a design strategist for consulting firm Jump Associates and the co-author of Wired to Care: How Companies Prosper When They Create Widespread Empathy, a book and blog that are significantly more interesting than you might initially think. Pete’s particular Apple avocations are both around design–interface and industrial. Follow him on Twitter!
