Wall Street is crushing Apple

By Zach Epstein on Nov 8, 2012 at 9:45 AM
Email @zacharye

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Apple (AAPL) launched the fastest-selling smartphone in history in late September and the company went on to post a record September quarter, during which it earned $8.2 billion in profit on $36 billion in sales. The company also issued impressive guidance for the holiday quarter, anticipating a record $52 billion in revenue. Since Apple’s stock hit a record high when the iPhone 5 launched, however, it has lost more than $130 billion in market value — closing at $558 on Wednesday, down nearly 21% since late September. Why is Apple’s stock tanking as the company continues to break record after record? Wall Street.

As dominant as Apple is right now, Wall Street analysts continue to issue sky-high estimates that hammer the company when it can’t meet them. This is the game we play, of course, and while Apple’s stock soared when it was regularly beating estimates, it is now heading back down to Earth as analysts adjusted by raising expectations even further.

When Apple only pulled in $8.2 billion in profit last quarter, it was a miss. And when the company only sold 3 million iPads during the iPad mini and fourth-generation iPad’s opening weekend, it was a miss. Now, a number of analysts are pushing the stock down further — DoubleLine Capital’s Jeffrey Gundlach, for example, sent shares of Apple down further when he went on CNBC and said Apple’s stock is headed to $425.

Even analysts that will remain bullish on Apple until the day it dissolves are inadvertently contributing to the stock’s tumble. When Apple sold a record 5 million iPhone 5 handset during the phone’s debut weekend, the company’s stock slipped because Apple bulls like Piper Jaffray analyst Gene Munster were calling for opening-weekend sales to reach as high as 10 million units.

Will Wall Street lead to Apple’s ultimate demise? Is it even the Street’s fault or is Apple done innovating? Apple may very well be in decline, but beginning to panic in the midst what is shaping up to be the biggest quarter in history for a consumer electronics company may be somewhat premature, especially when most analysts’ fiscal 2013 estimates remain sky-high.



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