One week ago, I came out with a bullish report that advised
readers to buy
. Though the shares have fallen since last week, I maintain that
buying AAPL before earnings is the right move.
Last week, I cited (among other things) that Apple would sell
more iPhones than expected.
Analysts worried that supply disruptions reduced iPhone 5 sales.
However, it's unlikely these sales were lost.
U.S. shoppers spent $42.3 billion during the year-end holiday
season - a 14% increase from last year. It's likely that
consumers kept Apple products on their shopping lists in November
and December, meaning a portion of that $42.3 billion headed
In an unfortunate bit of timing, the
Wall Street Journal
reported that Apple was slashing parts orders on the same day as
my bullish article. Initially, the
claimed Apple was cutting iPhone parts orders by half from 65
million during the March quarter.
Other reporters quickly caught wind of the apparent story and
jumped on the Apple-bashing bandwagon. The flurry of negative
news sent AAPL tumbling by more than 3.5% last Monday. AAPL
declined another 3.2% on Tuesday as investors jumped from the
Though most investors turned negative on Apple, some devotees
haven't changed their colors. In fact, a large portion of the
investor base believes the stock was a victim of manipulation.
BGR's Tero Kuittinen was among the first to challenge the numbers
article. Kuittinen explained that the consensus sales estimate is
52 million iPhone units for the first quarter. The March quarter
is soft (seasonality) and most analysts expect around 30 to 40
million iPhone unit sales.
Kuittinen rightfully questioned where the 65-million iPhone 5
number came from. Unit sales were never expected to be that high.
Only 52 million unit sales are expected in Apple's strongest
quarter. And roughly 85% of that figure will be from the iPhone
5. So why would the
expect 65 million from the weakest quarter?
The fishy part, as Kuittinen claimed, was that "the current
version of the
article no longer cites the 65 million unit figure. Sometime
between Sunday at 8:00 p.m. EST and Monday at 7:00 a.m., the
Journal decided to drop the number from its article. But if the
65 million number is not right, is the estimate for halving March
I'd agree that the 65-million number came from left field. I've
never seen an estimate that high and I don't know where it came
from. However, I'm not sure the inclusion of that specific number
was manipulative. However, there's more ...
Eric Savitz also chimed in. Savitz pointed out the
information was old news and directed his readers to an analyst
report compiled by UBS last month. UBS lowered their iPhone 5
sales estimate to a range of 25 to 30 million units in the March
quarter. They are modeling 45 million iPhone unit sales for the
The remark about cutting production by half appears reasonable,
albeit misleading. The production revision was five million, not
30 million. So the
misled its readers by reporting that orders will be cut in half
amid weak demand.
However, the worst part of the
story may not be that it was poorly reported. The worst part is
that the decrease to orders is old news. Analysts already cut
their estimates for iPhone sales weeks ago. The
article repeated dated information that should have been
reflected in the stock price. Instead, their bearish article
caused a two-day rout that erased $38 billion of value and took
the shares 7% lower.
So the Apple defenders have a valid claim against the
. The misleading article likely caused a panic that hurt AAPL.
However, I'm not really sure what the
had to gain from its piece. If anything, the only thing the
gained was the knowledge that it needs to hire a new editor or do
a better job of fact checking in the future.
Though many Apple zealots are screaming manipulation, I'm afraid
I don't agree.
Apple continues to be one of our favorite stocks. In fact, we
recently sent readers of
Top Stock Insights
three reasons to buy the shares before earnings are announced on
January 23. More information about this report and our investment
service is available by clicking