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If Analysts Are Scared of Apple, Why Raise Estimates?

NEW YORK (TheStreet) -- With Apple's (AAPL - Get Report) earnings on deck today, realize that the media is not being purposefully deceptive. Only careless.

Nearly all are remarking on the fact that Wall Street is nervous. And they are right, to a degree. The stock has been coming off, slipping about 75 points from its high of 644 earlier this month. As the media has done well to point out, widespread concerns about iPhone, iPad and Mac sales are afoot.

But something else is going on, which few are mentioning.

Wall Street earnings estimates for Apple's second quarter (which is due to be reported after the close) have been creeping up, big time. In the past month, nearly 20 analysts have raised their estimates, with the average stretching from $9.75 to $10.06. Even within the past week, at least six analysts have increased their numbers.

This is central to understanding potential market reaction to Apple's earnings. It is normally more meaningful to beat longstanding expectations. Moreover, traders tend to punish companies that miss recently increased earnings.

In the case of Apple, traders risk falling for the assumption that expectations are only low. The stock is declining. There is fear out there. But reality is more complicated. Wall Street analysts are actually--increasingly--excited about Apple's report.

Most are failing to mention that, though. CNBC both hit and missed.

In one story, "Pressure Rises on Apple for Earnings Beat as Market Wobbles," they did not even touch their toe on the increased-estimate issue.

In another, "Will Apple's Earnings Worsen the Stock Selloff?" they showcased the upgrades, suggesting a fitting bit of caution.
At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page.

For his "Business Press Maven" column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers.

Fuchs appreciates your feedback; click here to send him an email.

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