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MacBytes
Oct 12, 2005, 08:52 AM
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Category: Opinion/Interviews
Link: How can profits soar and stocks tumble? (http://www.macbytes.com/link.php?sid=20051012095243)

Posted on MacBytes.com (http://www.macbytes.com)
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fixyourthinking
Oct 12, 2005, 09:43 AM
The "Wall Street expectations" were solely based on higher iPod sales. But were those estimates for THIS QUARTER???

Apple reports on a different fiscal schedule than many companies and frankly I believe it is a contrbuting factor here. Apple's 4th Quarter of 2005 ended September 24, 2005. This included the months of July, August, and September. Apple's first quarter 2006 will include October, November, and December of 2005. The iPod Nano (which analysts included in their "estimates") was only released September 6, 2005!!!

I think "analysts" included iPod Nano sales for the full quarter which was expected to be about 3 million. Instead, for the reporting period, Apple shipped about 1.5 million Nanos.

I also have to make a [ REDUNDANT COMMENT ] : The past few weeks have slowed iPod sales considerably due to the Rumor Mill proclaiming Video iPods. So folks, yes, Apple had a great quarter ... in fact, it was a record revenue quarter (in every sales aspect) but, look what happened to the stock ... were rumor sites (as I have suggested) partially to blame?

nagromme
Oct 12, 2005, 11:07 AM
Related Q: how can people with no Apple stock worry so much about Apple stock? :D They have plenty of cash to keep innovating whether they miss some random outsider prediction by 1% (while exceeding their own goals) or not.

(I know many people DO have Apple stock, but it sometimes seems that people who don't still worry when it fluctuates.)

wordmunger
Oct 12, 2005, 11:23 AM
Econ 101: the price of stock will instantly reflect EXPECTED earnings, not actual earnings.

Think about it: if you know today that company A will be worth $10 million tomorrow, wouldn't you pay at least $9.9 million for it today?

Now tomorrow, if it turns out that the company is actually only worth $9.5 million, then the stock will tumble. It doesn't matter that it was only worth $5 million yesterday.

IJ Reilly
Oct 12, 2005, 11:48 AM
Econ 101: the price of stock will instantly reflect EXPECTED earnings, not actual earnings.

Think about it: if you know today that company A will be worth $10 million tomorrow, wouldn't you pay at least $9.9 million for it today?

Now tomorrow, if it turns out that the company is actually only worth $9.5 million, then the stock will tumble. It doesn't matter that it was only worth $5 million yesterday.

True, but in fact Apple beat earnings expectations -- by quite a bit -- and earnings are what really matters in the immediate term. The real story here, as nearly as I can tell, is the highly imperfect art of reading the tea leaves for the future. Investors are looking for evidence that Apple's growth rate is slowing, and some think they might have found it.

mrsebastian
Oct 12, 2005, 03:50 PM
it's just a minor dip, while the speculators get out and take their profits before apple has a chance to crash (not that it will). give it a few weeks and i'm sure we'll see apple stock take a nice jump and by this time next year, i wouldn't be surprised if the stock split again :D

IJ Reilly
Oct 12, 2005, 03:56 PM
it's just a minor dip, while the speculators get out and take their profits before apple has a chance to crash (not that it will). give it a few weeks and i'm sure we'll see apple stock take a nice jump and by this time next year, i wouldn't be surprised if the stock split again :D

That's certainly an optimistic reading. Not that I think the stock is dead now, but I believe the best momentum is probably behind us. I didn't see Steve pull any rabbits out his hat today.