Thursday, October 23, 2008

Bloggers outperform Wall Street analysts

Fascinating analysis comparing bloggers forecasts for Apple results vs. the professional analysts: Apple Q4 earnings: Analyzing the analysts in Fortune yesterday.

Sacrilege to the traditional sell side but this time the bloggers were better at predicting Apple's results. The reason seems to be that they got much better estimates of the on-the-ground data on iPhone sales. "What jumps out of the chart for me is how badly the pros blew the iPhone numbers: the Street consensus was off by a shocking 72%. It was here that the bloggers shone. All three came within 8% of the actual number and Turley Muller of Financial Alchemist hit it on the head with an estimate of 6.8 million.
“I was just lucky the data was good,” says Muller. “All the data — my checks with Best Buy managers, counts at Apple stores, IMEI numbers, assumed production rates — pointed to the same general number.”"

However, the analysts are better at building the financial models - not surprisingly since that is a core part of their job. And the Piper Jaffray analyst did have the courage to forecast deferred revenue but was far off on the EPS estimates.

"Bottom line: Nobody got everything right, but considering how badly the pros misjudged iPhone sales and how close the unpaid analysts were on the other numbers, I have to give this round to the bloggers."

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