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Thought you were smart by investing in Apple? Well, this might be a good time to short it

I know this is going to turn into the inevitable iPhone/Android pissing contest, but this whole thing is something we should all be concerned about, no matter what phone you have.  The amount of power that analysts who have no actual role in the company and are looking in from outside to try to guess what a company *should* be doing is immense.  Apple has enough money in the bank to withstand them, but thousands of people lose their jobs because a company missed a target set by some analyst who probably, all things considered, doesn’t know that much more about the company than anyone else and set unreasonably high performance targets for them.

First paragraph of the article: Apple’s shares could tank if it misses it’s numbers by a ton.

The rest of the article: The market expects Apple to “beat” its numbers which puts expectations close to $2. Apple’s revenue is expected to rise from $42.2 billion to $51 billion.

Remember: if TFA’s headline is a question, the answer is probably “no”

People treat the stock market like a slot machine, and as soon as it stops paying out, they panic. A 20% drop will be a good time to load up.

Theoretically, stock fluctuations have a minimal effect on the company, since a huge majority of stock sales on the open market have nothing to do with the company underlying the shares.  Unless the company is in the habit of using its stock as collateral for debt, in which case the discussion changes dramatically.

I would also note that the more reputable (though not really more accurate) analysts base their estimates on numbers actually coming from the company.  They get this information talking to executives, financial market contacts, etc.  The estimates might be guesses pulled from someone’s ass, but quite commonly that someone is from the company under discussion.

The problem with this (and I AM NOT!!! accusing Apple of this) is that the pressure to “beat the street”, that is report earnings above analyst’s estimates, has in the past led companies to be maybe more optimistic in their earnings reports than is completely justifiable.  In other words, executives will mislead investors with regards to earnings so their restricted stock units and options retain their value.  That’s a big chunk of their money, since compensation is always tied to company performance, otherwise known as what the stock price is doing.  I’m not going to go into detail on all the various ways there are to legally mislead people in an effort to pump up the stock value, suffice to say there are a lot.