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Last week's earnings miss from Apple (AAPL - Analyst Report) obviously wasn't the whole story. Now it's all about margins, supply and delivery constraints, competition, and a slowing growth rate.
These issues show up in hard numbers in the analyst earnings estimate revisions (EER) that have been pouring in to the Zacks databases. Below is a table of consensus estimates which show the deluge of downward revisions taking the December quarter to $13.55 from $15.65 and the Fiscal Year 2013 (including this holiday quarter) down to $51.22 from $53.57.
To get an idea of how the consensus estimates are coming down so hard, it often helps to look at what analysts are doing individually. In a addition to the tables above, we can also see on Zacks Premium the specific moves of certain houses and their analysts. Below is the EER for the December quarter as of October 25.
You can see that some generally optimistic analysts like Stifel Nicolaus, Jefferies, and Oppenheimer have taken down their estimates quite a bit. Three other very important investment banks not shown here have taken their Dec quarter estimates down over 20% to below $13.
Now let's look at the full-year 2013 estimates. Again, we see some of the more bullish houses like Stifel and Oppenheimer coming down over $6 (11%) to $45.90 and $47.01 respectively, while Gabelli & Company (GAMCO) came down $3 (6%) to $47. Note also how they are all well below the current consensus of $51.22.
One bullish standout here is still Jefferies who, while lowering their FY13 estimate by $4.36 (7%) to $58.43 from $62.79, is still top of the range. They stand in stark contrast to the three unnamed investment banks who average a $7 hit to FY13, inline with many others coming down to the $47 handle.
What About Apple TV?
One analyst I haven't heard from yet is the super AAPL bull Gene Munster of Piper Jaffray. He, like the gentleman from Jefferies, is likely counting on Apple TV sometime next year to be another product category game-changer. I looked for any post-earnings interviews with Munster on Bloomberg TV where he often appears but couldn't find any.
But the real point here is that most analysts are not "modeling" anything about Apple TV into their 2013 estimates. What doesn't exist yet cannot be sold yet. And therefore, it can't be put into earnings estimate models.
Apple will no doubt continue to be the dominant disrupter in the mobile mega-trend. And they will continue to please their existing customers and win new ones as they build out their product/service ecosystem, integrating the "4 screens" of phone, tablet/notebook, desktop, and eventually, TV.
Until then, the only thing we are very certain of is that the analysts have missed bigger than the company in their overly optimistic projections for growth this year. So that means even if AAPL shares, trading around 12X ($600 / $50 EPS), are destined for $700 again, it could take a while to get there.
Is Most of the Damage Done?
And this downward EER explains much, of course, about Apple's recent share price action. Price spoke first in October and told us something was coming that shareholders may not like.
I had thought only a September quarter earnings miss was getting priced-in a few weeks ago. I didn't see that it was about the guidance and margins and supply/delivery/quality issues too.
But the good news is that after lots of big liquidation above the $625 level, the stock held up on Friday extremely well given all these negative analyst reactions.
That makes me think a lot of this bad news (significantly-lowered growth expectations) is now priced-in too. Instead of a vicious gap down like Google (GOOG - Analyst Report) suffered after its earnings miss, Apple was in a slow melt-down for a month.
So this is the big question as trading resumes Wednesday: Are these lowered expectations priced-in to the stock at $600?
And even if so, will a final capitulation selling event, testing support around the $550-570 area, still be necessary?
I think it might be. And I also think it will be a great buying opportunity for investors with at least a one-year horizon.
Kevin Cook is a Senior Stock Strategist with Zacks.com