How Apple Managed to Surprise Analysts and Wall Street

Even for CEO Tim Cook it was a major surprise, but for Wall Street and many analysts, the amazing fourth quarter that Apple recently posted, including their $18 billion in profits and $74.6 billion in revenue, was a huge eye-opener

Barry Ritzholtz, CIO of Ritzholtz Wealth Management, has an opinion about why no one predicted Apple’s stunning profits. “I don’t think [they] understand the relationship people have with their iPhones, iPads and Macs,” he said, referring to analysts. indeed, considering that there is huge fourth-quarter earnings were a surprise to analysts and investors alike, maybe no one truly understands the symbiotic relationship that Apple products with their owners.

On their earnings conference call following the blowout quarter, Tim Cook admitted that “Demand for iPhone has been staggering, shattering our high expectations,” adding that “This volume is hard to comprehend.”

The vast majority of those prophets were made on the iPhone 6 and iPhone 6 Plus. The fact is, the iPad has been rapidly dropping in terms of overall sales and the iPod is on life support. Macs are still selling but not at a rate big enough to support the entire company, not by far.

At the end of the day, it’s all fallen onto the iPhone’s shoulders and, so far, though shoulders seem to be wide.

Of course there’s never any guarantees and, with the Apple Watch coming soon and no doubt the iPhone 7, it will be interesting to see if Apple can keep up this amazing run. For those looking to purchase their stock, Ritzholtz says that it’s “still relatively inexpensive”. (It’s currently trading at a P/E of 15.8X.)

Amazingly, their recent quarter accounted for slightly more than $2.5 billion, which equates to 51% of the S&P 500 index’s $5 billion increase, making it the largest growth contributor to the S&P 500 in the fourth quarter at the company level. In fact, if it wasn’t for Apple’s stellar quarter, overall earnings for the fourth quarter would be zero.

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