Apple Inc. (NASDAQ:AAPL)’s earnings forecast for this year has done nothing but drop, and according to MarketWatch, the company’s problems could worsen before there will be any improvement. The tech giant’s January earnings report came out ahead of consensus on the earnings front, but it apparently wasn’t good enough for investors, although analysts certainly liked it.
Shares of Apple Inc. (NASDAQ:AAPL) hit their all-time high in September at $705 per share, but in just months, they’ve fallen back down to $450 per share. If the trend since the markets opened this morning continues, the stock will fall below the $450 mark again.
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So why have investors been giving Apple Inc. (NASDAQ:AAPL) such a hard time lately, even though analysts continue to dote on the company? MarketWatch’s Mark Hulbert believes it’s because analysts just can’t face the facts.
Investors like to see growth in the companies they invest in, and most of the time they have knee-jerk reactions to bad news, or in the case of Apple Inc. (NASDAQ:AAPL)’s latest earnings report, news that’s just so-so rather than spectacular. Analysts, on the other hand, seem to be quite slow when it comes to reacting to bad news.
Hulbert interviewed Michael Clement, an accounting processor at the University of Texas at Austin, and he said downward revisions to earnings are typically followed by another downward revision to earnings. Apple’s earnings forecast for fiscal 2013 started at $53.56 per share back in September when the company’s stock was in its heyday. However, now consensus for fiscal 2013 has dropped to $44.56 per share. This means we could see yet another downward revision for Apple’s earnings in the near future—which means more bad news for Apple Inc. (NASDAQ:AAPL), whether analysts like it or not.
So why do analysts take longer than investors to react to bad news? According to Clement, there are a few reasons. For example, analysts might not want to offend the company’s management. In addition, their firms may service large institutional investors which hold large positions in the company’s stock.
Of course, this isn’t to say that the market doesn’t react when analysts raise their estimations of companies like Apple Inc. (NASDAQ:AAPL). However, it is important to note all of the information when making a decision about any stock.