Wry & Dry

Apple: the numbers don't add up

W&D noticed a fever in the US about the then upcoming Apple 'release'.  That release has now happened (yesterday) and was more about a thing called Apple TV than the ubiquitous iPhone. 

Of more interest to W&D than the seemingly endless upgrades to mostly useless technology was how the investment analysts calculate their profit forecasts for companies like Apple.  And hence W&D was drawn to the famous Lex column in the FT.  How is this for a simple example of how research analysts are sometimes dreaming.  Consider this. 

Some 220 million iPhones were sold last year.  Now assume that 95% of buyers from two years ago recommit to the brand and buy a new iPhone.  And that prices remain steady.  

Q.  How many first time buyers of iPhones does there have to be for Apple to meet analysts' profit forecasts? 

A.  80 million.  Good grief.  That is the population of Germany (excluding refugees).  And a 36% increase.