“The reigning king of tech stocks took a bad stumble Tuesday,” Kevin Kelleher reports for TIME Magazine. “Apple reported financial earnings that, on the face of things, met or exceeded Wall Street’s expectations. Yet there were also signs that sales of its largest product, the iPhone, may be slowing faster than most investors have expected.”
“Apple isn’t having trouble selling iPhones. The issue is whether it can keep selling them after the initial surge of demand that follows a new release,” Kelleher reports. “Apple says it sold 47.5 million iPhones last quarter. The consensus among analysts had been closer to 49 million, with some of the more bullish analysts arguing that Apple would surprise us with as many as 52 million iPhones sold last quarter.”
“Yes, Apple beat expectations, but it really just kind of squeaked past them, whereas it typically leaps over them with a substantial margin. In other words, beating the numbers isn’t enough. Investors expect Apple to thrash them,” Kelleher reports. “It’s not so much that the iPhone will die. It’s that Apple releases a new generation every two years–with a semi-generation (the 4S, 5S, etc) released midway through the cycle. After Apple released the iPhone 5 in 2012, sales surged early before disappointing for quarters, even through the 5S release… The 8% drop in Apple shares is a hedge against this scenario playing out again. It may end up being a blip in Apple’s steady march toward a trillion-dollar market cap. But for investors focused on the next few quarters, it’s worrisome. Do investors have to wait for the release of an iPhone 7 in the fall of 2016 to ride a wave higher? Or does Apple have something in store to keep it from becoming a cyclical stock?”
Read more in the full article here.
MacDailyNews Take: Apple’s iPhone 6/Plus penetration among iPhone owners is a mere 27%. That means there are 73% primed for upgrading to the iPhone 6s/Plus. And, that’s not counting those fleeing from fragmandroid to quality in ever-increasing numbers. iPhone currently has 99% user satisfaction. 99%. Every single year now, there are hundreds of millions of iPhone users waiting to upgrade to Apple’s latest and greatest iPhone.
More than iPhone, knowledgeable investors will recognize that this is simply a return to the Apple guidance issue. With Apple stock, it’s all about the guidance. The rest of the “concerns” are mere periphery.
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