Apple 2.0

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Apple burned by analysts' overheated expectations

January 23, 2013: 8:16 PM ET

Ranking the best and worst Apple analysts for fiscal Q1 2013

Best nd worst q1 2013FORTUNE (Koh Ngai, Thailand) -- As evidenced by Apple's (AAPL) sickening $55.5 (10.8%) drop in after-hour trading Wednesday, the analysts who cover the company -- both on and off Wall Street -- aren't doing it any favors.

The company didn't have a bad quarter. In fact, it posted its best quarter ever with earnings per share of $13.81 on sales of $54.51 billion, up 7% and 27% year over year, respectively, when adjusted for last year's extra week.

MORE: 29 stunning Apple surprises nobody saw coming

But the stock market is an expectations game and Apple is expected to blow past analysts' estimates, not miss them. On Wednesday, it beat the Street's earnings estimate but missed on revenue. And judged by the forecasts of the independent analysts -- who in the past have served as a proxy for Wall Street's whisper numbers -- it missed badly on both the top and bottom line.

That's the kind of thing that can lop tens of billions of dollars off a stock's valuation in a matter of minutes.

Another way of looking at it is that Apple's analysts did worse than the company this quarter, and the amateurs as a group did worse than the pros.

There was no stand-out winner, although several analysts are worthy of special mention.

  • The Braeburn Group's Navin Arthanareeswaran, an independent with a last name that's a spelling test in its own right, turned in the best estimate for revenue and Mac unit sales.
  • Raymond James' Tavis McCourt hit the EPS number -- $13.81 -- right on the nose.
  • Ranked by best performance in revenue and earnings, CLSA's Avi Silver came in first.
  • Ranked by best overall performance in all categories, Sterne Agee's Shaw Wu took the honors.

On the other hand, there was no shortage of bad calls.

  • Some of the best-performing independents of past years -- including Daniel ("Deagol") Tello, Asymco's Horace Dediu and Bullish Cross' Andy Zaky -- ended up in the bottom third of this quarter's rankings.
  • Traderhood's Nicolae Mihalache, a particularly bullish indie, overshot earnings by more than $4 a share, revenue by more than $11 billion and iPhone unit sales by more than 15 million units.
  • Hudson Square's Daniel Ernst and Argus Research's Jim Kelleher underestimated Apple's revenue by $2.8 billion.
  • Kelleher also undershot iPad sales by more than 6 million units.
  • And Ernst predicted that Apple would actually miss its unusually conservative 36% gross margin guidance by a half percentage point.

The company ended up reporting a gross margin of 38.6%, but got no credit for that in after-hours trading. In fact, its Q2 guidance for GM in the range of 37.5% to 38.5% was cited as one of the reasons the stock got so badly dinged.

Below the fold: Our annotated master spreadsheet, with the best estimates highlighted in bright green, the second and third best in light green, the worst in red and the second and third worst in pink.

Smackdown annotated

Click to enlarge. Chart and data: PED

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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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