Remember your teacher or parent’s definition of insanity? Doing the same thing over and over and expecting a different result. Evidently, analysts and brokers need constant reminders of this when it comes to Apple and the rumors that surround the company and its products. I say that, but despite numerous examples, we keep treading over the same old ground over and over and over and………
Just a month and a half ago, everyone in the financial world except for Warren Buffet thought the iPhone X was a failure and that Apple’s Second Quarter results would be poor. Yet again, we were reminded that the supply chain is not an accurate indicator of Apple hardware sales. Apple’s May 1st Earnings Statement came as a big surprise to many, and brought about a huge rebound in their stock price, from down several percent back to new record levels. Apple’s unexpected good news was then followed by plenty of backtracking from the usual suspects.
And here were are again, less than two months later, and we have Apple’s stock falling 2% this week based on a Nikkei report that Apple is placing 20% fewer iPhone parts orders. And then several outlets latched onto the click-bait, wether they actually believe it or not. Philip Elmer-DeWitt issued his reliably accurate and deserved takedown shortly after. Seriously people, has anyone learned ANYTHING here? How many times will analysts have to publicly fall on their faces before they figure out that their normal methods don’t apply to how Apple approaches the supply chain? I just don’t get it.
Ironically, it seems that at least one analyst may have learned something back in May. Katy Huberty of Morgan Stanley was one of the more outspoken of Apple’s critics, at least in the short term, before the company’s Second Quarter report. She set her target price down to $203 per share over the next year, which made some waves at the time and sent Apple’s stock down yet again.
Ms Huberty was one of the analysts who publicly backtracked and changed their pricing estimates in the wake of Apple’s Earning’s Announcement:
“Even if smartphone replacement cycles continue to lengthen, we see Apple delivering 4% revenue and 16% (earnings per share) growth over the next three years with services the primary growth engine.”
She also raised her price target up from $203 to $214 in the aftermath, but many other analysts did the same, as well.
I know that Ms Huberty is seeing things a bit differently these days because, in a report released two days ago, she questioned the negativity of the Nikkei report using “her own supply chain checks.” While she is still relying on supply chain information to draw conclusions about Apple hardware (which is still dangerous territory), it appears that she at least learned a lesson in how the company operates differently than the rest of the market. You can’t use the same old methods to get a bead on how Tim Cook handles the supply chain. You have to use context and direct comparison to Apple’s previous performance to make some sense of the raw data.
Well, at least someone learned their lesson in May. Maybe the analysts in charge of reporting on Apple for the Nikkei should give her a call. I won’t hold my breath.