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Monday, October 17th, 2011
changing the game

It’s highly unusual for me to return to a topic so soon after a previous posting, but here we are once again at the Apple cart with everyone else.

What brought me back was an interesting CNN Money article by Philip Elmer-Dewitt that compared expectations regarding Apple (AAPL) results from the “growing community of bloggers, private investors and assorted amateurs” versus those of Wall Street analysts.  The author’s bottom line is represented by the title, “Wall Street still doesn’t understand Apple.”

The article is a reflection of a new reality that I talked about in a speech to sell-side firms in September.  The research information system is changing and the Street hasn’t really realized it yet.  As I said in the written summary of my remarks, “The clustering of research output and methods in the industry might make some sense in a closed world, but not in the open one of today. It is a prescription for obsolescence.”

Part of that clustering is shown in the top clip above, which illustrates the movement in consensus estimates for Apple since last fall.  The numbers are as compiled by Bloomberg for this fiscal year (to be released tomorrow) and next.  You can see the pattern that exists:  A slow drift up, then a little faster, then a jump when a quarter is announced.

As it happens, I’ve written about the action during those interim periods, as analysts play a game of behavioral leapfrog with their earnings estimates (on which I elaborated further in a bout of more leapfrogging).  However, the clock is running out on that game and a new one has already begun.  (Chart:  Bloomberg terminal.)