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Apple Formulation

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Apple Full-Year 2016 Earnings Per Share Of $8 A Distinct Possibil...

http://seekingalpha.com/article/3798786-apple-full-year-2016-earn...

Apple Full-Year 2016 Earnings Per Share Of $8 A Distinct
Possibility
Jan. 8, 2016 10:34 AM ET by: Michael Blair
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in AAPL over the next 72 hours. Summary
Top down forecasts show weaker revenues from iPhones and iPads as unit volumes wane.
Volatility in China's stock market suggests an economic turn-down likely in that key market.
AAPL stock is breaking down below $100 per share and the trend is lower.
Forecasting is always a challenge but it's essential to smart investing. Forecasting the world's most valuable company is a full-time occupation for literally dozens of analysts employed by investment firms worldwide. Getting the forecast right determines the success or failure of an investment thesis and ultimately whether risk is rewarded or punished.
In the case of Apple (NASDAQ:AAPL) forecasting is made easier by the very limited portfolio of products Apple currently sells and the importance of the iPhone to its revenues. A 5% error in the number of iPhones shipped in a given year amounts to something like $6 or $7 billion in revenue and as much as $2 billion in net income depending on margins rates.
Analysis who can forecast to within 5% accuracy are a rare breed, so the fact is that investors will find little certainty in forecasts. What they can see with greater clarity is the first derivative of forecast sales - the rate of growth or decline as time passes. I believe the volatility in many technology stock prices reflects investor reaction to relatively small changes in rates of growth or decline since those changes may point to inflection points where it's dangerous to be on the wrong side of the
street.

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