Monthly Archives: October 2005

No, Seriously, How Do I Become a Wall Street Analyst?

Apple Computer releases their quarterly results tomorrow, and as always, Wall Street analysts are lining up to read the tea leaves. And, as always, they’re really annoying me.

For example, take Richard Farmer of Merrill Lynch, noted in a TechNewsWorld article:

“Richard Farmer of Merrill Lynch wrote in a research note that he expects Apple’s Mac revenue to grow 25 percent over the $1.23 billion the desktop and notebook PCs took in a year ago. Farmer attributes the growth to a strong back-to-school selling season, in which Apple offered a free iPod mini with a computer purchase.”

OK, fine. But then there’s this:

“Farmer said he expects Apple to exceed his own earnings forecast of 37 cents a share.” (Emphasis added.)

So let’s get this straight: This Wall Street analyst expects Apple to beat his expectations.

No, seriously, how do I sign up to become one of these Wall Street Analysts? Are there vouchers to become Wall Street Analysts hiding at the bottom of Cracker Jack boxes? Or maybe some type of children’s cereal? I minored in mathematics — does that make me ineligible? I hope not.

Richard Farmer is by no means isolated in his “expectations.” All of the major analysts are expecting Apple to beat their expectations this quarter.

I have a simple request for these analysts: raise your estimates, then. Stop trying to have it both ways. No matter what results a company comes out with, these analysts line up to say they were right. Sure, positive analyst sentiment helps the stock price (in the short run), and that’s good for Apple shareholders like me, but I would rather have accuracy and reasonable expectations — because companies get hurt just as easily when analysts come up with boneheaded predictions.

And what purpose do Wall Street analysts serve, anyway? There have been studies that show their predictions are often less accurate than completely random predictions.

It’s all kind of silly, isn’t it?