Financial analysts: The rights and the wrongs of forecasting

Analysts as a tribe usually keep quiet when they get things wrong. Most of them got huge portions of egg on their faces after Apple's fourth-quarter results. But Horace Dediu, my favourite number cruncher, is quick to tell us what he got right and what he got wrong. Overall, it's not a bad score and the reasoning behind his estimates is fascinating.

Apple's phenomenal results in perspective

Overnight, those tremendous results from Apple are beginning to sink in. Apple is today the world’s most valuable company and yet continues to grow at a phenomenal rate. The competition is being blown out of the water. MG Siegler puts the figures into perspective.

Astounding earnings from Apple: Stock price up $30 in after-hours trading

Apple’s first-quarter results announced this evening have blown away Wall Street’s estimates. The company recorded a stonking and unexpected $46.3 billion revenues and earnings per share of $13.87. Both iPad sales (15.4 million) and iPhones (37 million) comfortably exceeded even the wildest analyst projections. Even Mac sales remained extremely healthy at 5.3 million units.

According to Erick Schonfeld writing in TechCrunch, Apple’s growth in the quarter was astounding: “It has now sold 315 million cumulative iOS devices.” Apple ended the quarter with $97 billion in cash.

Apple to deliver biggest earnings blowout while Wall Street slumbers

In a special article for AppleInsider, Bullish Cross’s Andy M. Zaky reckons that Apple is about to announce the biggest earnings blowout in company history: “The largest company is America is about to grow its earnings by a whopping 84 percent this year”, thus forcing Apple’s P/E (price/earnings) ratio to under 12. He says Wall Street is “asleep at the wheel” at a time when analysts are deciding to buy Amazon at a P/E of 95 or Google at 22. If Apple were valued at Amazon’s lofty level, Apple stock would be approaching $4,000 instead of today’s $380.

Asymco details comparison between forecast and actual Apple figures

Earlier this morning I published a rough-and-ready run-down on Horace Dediu’s Apple forecast figures compared with the actual results. I reckoned they were pretty accurate. Now Horace has posted his detailed assessment and is a little less kind to his prognostications. Since the article gives a good deal of background and an insight into the analyst’s thankless task, I’m reproducing the text in full.

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