Apple 2.0

Covering the business that Steve Jobs built

How the Street came up with 8% growth for Apple in 2014

December 16, 2011: 8:16 AM ET

Horace Dediu tells the story. The narrative is fictional, but the numbers, sadly, are real. 

Source: Asymco

In masterpiece of analytical satire, Asymco's Horace Dediu on Thursday recreated the thought processes that led Wall Street's top analysts to grossly underestimate Apple's (AAPL) earnings every year since 2005.

Their performance would be laughable if it didn't materially affect Apple's share price. But the numbers these analysts come up with form the "consensus" that determines the forward price-to-earnings (P/E) ratio -- the basic measure of whether a stock is fairly priced.

Dediu's little tale of infectious pessimism in the face of market disruption is a great read, and a lesson for those who wonder why Apple's stock is so cheap. Don't miss his responses in the comment stream. Click here.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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