How Much Influence Do Analysts Have?

 

First, I have a disclaimer. I am not any kind of financial wizard, accountant, stock guru, or anything of the sort. I am a regular schmuck consumer, trying to keep some savings going, a bit of investing on a very small scale, but I am a news reader.

That’s where the problem starts; the news. In particular, the financial news steered by a group of mystics known as analysts.

I’ve spouted my frustrations before at the analysts, but more is needed. By a lot of people.

The analysts and the media that publishes their expert opinions are becoming far too powerful. Powerful enough that they really are effecting the incomes and reputations of companies, and in turn, individuals.

They are able to do it with a mere quote in an article to start with. From there, it depends on the amount of band-wagon jumping from other publishers and journalists.

The biggest example of how media manipulation (media being the analysts and the people who report on them) can effect the bottom line of both people and companies is Apple.

As I said, I’m no expert, but I could not understand how a company that is still reporting record sales could crash so dramatically in the stock markets.

Their stocks dropped after reporting massive sales in the last quarter! All because some analysts figured they should have done better. Not only that, they believe that the company isn’t going to do well in the future regardless of Apple’s track record proving the opposite. How does that work??? Are they psychic?

Somehow, they’ve been able to sell this vision to the public…kind of. It’s absolutely bizarre scanning through headlines where you have one article saying how Apple is dying while the next article can be a survey showing a high percentage of people still preferring IPhones and plan to buy one in the near future.

Unfortunately, the barrage of negativity does start to create a self fulfilling prophesy as now, it does look like it could be effecting consumer choices.

So when that happens, were the analysts correct or did they just influence an outcome that wouldn’t have been otherwise? You tell me.

It becomes easy to sound like a conspiracy theorist, and it would be hard to prove otherwise except that Apple is such a good example of this manipulation, I don’t have to convince anyone. All you have to do is forget everything you read, look at Apple’s financial picture and apply the standards that the analysts are supposed to be using and it becomes clear that there is no rhyme or reason for what’s happening to it’s stocks.

At Apple’s shareholders meeting last week, they reported revenue growth of $48 billion dollars. To put that in perspective, that is more than Microsoft, HP, Dell, Nokia, Blackberry, and Google…combined.

Yet somehow, analysts have their Price-Earnings ratio lower than some of those same companies suggesting that somehow, they are not strong enough to compete long term with Microsoft or even Dell.

Does that sound right to you?

Do you get the feeling that there games going on above the likes of you and I? At the risk of sounding like I might be wearing a tin foil hat (maybe I am, maybe I’m not) but do you think some people are making huge money by manipulating markets to their own advantage and it’s not the average joe investor who thought Apple might be a good solid long term investment?

So keeping the most blatant example of Apple in mind, I want to point out another company to watch closely and see if you think there might be some of the same steering going on. That company is Blackberry, formerly known as Rim.

Rim was a company that made a lot of mistakes. They got cocky, lazy, and complacent. And they got burned, badly.

That story is well documented. They figured they had nothing to fear from the likes of Apple and others with their fancy new touch screen smart phones. They were wrong.

That complacency also made it difficult to change direction as well. It has taken them a long time to get that ship turned around and chugging a different path. Some say too long.

To their credit, since then, the old Rim has done a lot of things right. It’s been interesting to watch as their plan forward has been revealed slowly. Interesting to see how Blackberry has taken into consideration so many factors simultaneously, none more or less important than the other, and packaged a come-back strategy that has been impressive to say the least.

Not perfect, but persistent. And consistent.

What seemed like sure disaster last year when Rim delayed the launch of Blackberry 10, is seemingly paying off now with an OS that already has most of it’s bugs sorted out.

Had they rushed a release that was far from ready just to meet a deadline, they surely would have been finished but they took the realistic path and faced the heat of the critics all the while.

Arguably, the timing for release worked out well for a few reasons: Apple’s perceived slide in popularity and a lull for big Android launches although it’s getting very close to the release of Samsung’s new S-IV.

Ideally, the release to the American market would’ve been closer to the official January launch of BB 10. It has allowed for a fair bit of buzz to build up in anticipation, but judging from users on the Crackberry forums, also some frustration at this wait time. We don’t have a patient society when it comes to getting our new toys.

All that aside, the media still continues to trounce Blackberry at every opportunity despite the reader reaction which has been emphatic defense of the product.

So much so are the reader comments against these anti-Blackberry authors, I’m sure some have regretted ever writing their columns.

So why if users of the new Z-10’s are primarily pleased with their phones are the majority of stories still negative?

If you don’t believe me, just do a Google news search for Blackberry or something similar and you will see how quickly any flaw or setback is widely covered while the majority of positive or just plain unbiased reporting comes mainly from devoted Blackberry sites.

Big news is made when analysts like Canaccord makes a huge sales estimate downgrade, which in turn dramatically effected stock prices, yet when they are forced to back pedal and admit they were way off, there is moderate coverage but not a whole lot of upswing in stock prices to compensate.

Currently, the bulk of Blackberry news in Google’s search query is how Netflix will not be coming to Blackberry anytime soon. Last week, it was Instagram won’t be available. Lots of mileage was made with that until users took matters into their own hands and circulated a very capable Android port of the app. It’s only a matter of time before a similar Netflix port can be crafted as well.

It has to be getting harder to come up with negative stories to write by now. The most legitimate flaw that I had concerns about was the below average battery life, and yes, critics also reported thoroughly on that issue. Fair enough.

Conversely, with Blackberry’s first major update to the operating system last week, they listened to their customers and critics and addressed that issue. Whatever they tweaked made a huge difference in battery life…huge! Yet again, there certainly was not an equal amount of reporting on that fix.

In fact, many of the articles regarding the update put the spin that it must be really bad for Blackberry to have to release an update only a month after the release of the OS.

You see what I’m getting at here? Essentially, it doesn’t seem to matter what Blackberry does, the majority of the tech press and/or the market analysts seems to want them to fail.

It would be naive to think that one could simply ignore predictions, forecasts, press, etc. and let the real sales tell the story because, unfortunately, those things are going to impact the sales, and the stock prices, in a very real way. It already is effecting the stocks.

If a company like Apple can be effected by media coverage to the tune of billions of dollars, imagine the impact it could have on a company like Blackberry who is already working to overcome some pretty bad times.

One could speculate endlessly on reasons as to why such harsh treatment: short stocks, bitterness in the American market for the delayed release there, competitors, or even just fear of crow eating.

But even if any of those became blatantly obvious, it would be near impossible to prove, nor are they technically illegal. Immoral, yes but outside of direct evidence of tampering with stock prices or whatnot, not prosecutable.

It will be very interesting to see some real sales figures soon.

Fortunately for Blackberry, they have a very devoted and outspoken community of supporters who are generating a great deal of word of mouth as well.

And judging by the near instant backlash that journalists are receiving when they are writing unsubstantiated or unfair biased articles, they may have to start worrying about their credibility. Rightfully so.

The bottom line should be letting Blackberry’s consumers decide how the product fares. If the products are duds, the customer word of mouth will dictate its value.

- Dr. Hannibal Moot

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