Jul 242012

Well THAT wasn’t expected.  Apple today reported earnings far below estimates, and also far below what the statistical model said was probable.  Make no mistake.  This wasn’t a miss related to inconsistent analyst estimates, such as we had October 2011, due to overly optimistic analysis by analysts.  That’s what the model is intended to detect and report.  No, this quarter was not such a miss.  This was a miss entirely attributable to Apple itself.  And it was a miss that was outside anything typical of Apple over the past 8 years.

I use data going back 8 years as part of the statistical analysis, and there has been nothing like this earnings report in all that time, not even during the financial crisis.  This was outside the normal expectation on earnings by such an extent that it made the standard deviation calculation jump up for use going forward.  Additional data is always good, as it will allow the model to be more accurate.

The model can’t protect against the result of a true miss like this one.  What it will do, however, is continue to output a true and accurate probability based on past data.  I suspect many analysts will over compensate once again, and curl up into a conservative, pessimistic fetal position, spewing gloom and doom, “this is the end of Apple”, rhetoric.  OK, maybe not to that extreme.  But I’m sure you understand my point.  Get ready for it.  It’s coming.  Rest assured, however, that the Earnings Beat model will be immune to all that, and continue the pure math of what the statistics actually support for the probabilities going forward.

I will update the Earnings Beat chart shortly.