Apple stocks down on lower than expected sales.
Apple stocks took a hit due to phones not selling as well as expected recently. This begs the question, does Apple really need to care? Should others be concerned as well? Or should everyone really just be ignoring this?
Firstly, yes, Apple should probably be concerned. Getting good information is hard because internet journalists just seem to rehash the exact same things with slightly different wording. All I know is that Apple missed their projections. I don't really know how sales are YoY or compared to the same quarter last year, etc... but generally, missing projections means at the least that the pace of growth is slowing. And considering that Apple has one of the most stable markets (loyal fans, consistent pricing and consistent quality) and that market is large enough to weed out most regional irregularities, slowing growth is important even if it doesn't mean that the business shrank.
Short term investors would probably be wise to buy now. Long term investors should probably jump ship. And the other players in the market should probably be concerned as well.
I could be wrong. The miss wasn't huge percentage-wise and there are probably some localized factors which could be to blame, for instance, China recently had some bad economic news and they are a big market for iPhone's. But, I'm not sure that was far enough back to have had time to impact these numbers substantially or even if that was big enough to hurt their sales there. But such widespread economic troubles are generally the only sorts of things that affect momentum in a company with the brand stability Apple currently has. We certainly haven't seen any major new players or market upsets recently. So, unless Apple is simply losing those sales to Android it seems like the smartphone market is starting to reach saturation and/or slowing down.
And that is what long term investors and the rest of the industry should be afraid of. If this is a sign that the market is slowing down, it will affect all major players in the long run. And for a company like Apple who presently makes the lions share of its earnings off of its smartphones would be a bad long term investment.
In the short term however, Apple is probably a good buy. Sales didn't miss the mark by much. Apple will still be ludicrously profitable for the remaining future and both Apple and industry analysts will adjust projections and based on the new model and thus Apple will likely meet or exceed those projections in short order, driving the stock back up. Basically, you're gambling that the sales don't appreciably decelerate, which is probably a safe bet for Apple. So if you're in the market for Apple stock, they probably won't go much lower than where they are now, and if you hold onto until the next major product release (iPhone 7) you're probably not exposing yourself to much risk.
No guarantees though. It is wholly possible that smartphone sales will shoot through the floor. In my opinion, smartphones haven't markedly changed in several years now. It is possible that people are just getting less excited about upgrading as soon as possible and are holding onto phones longer now. But, phone subsidies are still a thing, so even if people aren't thrilled about new phones any more, they probably still pick them up as soon as they can.
The other reason Apple specifically should be concerned is that they (idiotically) made an iPhone a pre-requisite for an Apple Watch. If sales of new phones compatible with their watch slow down, then it will have a trickle down effect to dependent devices as well, which would hurt their already hurting Watch sales.
Amusingly, Microsoft was ahead of this if it turns out to be a market-wide problem. Though their reasons for changing are different. By reducing their portfolio of new phones they should be able to increase profit margins even on lower sales.
Google has nothing to fear however. They aren't a handset maker, and an overall decline in hardware sales, as long as it doesn't affect their percentage of the market share is meaningless.
But players like Samsung, Motorola and other handset makers will probably be looking over their numbers to see if they are experiencing a similar trend or not.
Firstly, yes, Apple should probably be concerned. Getting good information is hard because internet journalists just seem to rehash the exact same things with slightly different wording. All I know is that Apple missed their projections. I don't really know how sales are YoY or compared to the same quarter last year, etc... but generally, missing projections means at the least that the pace of growth is slowing. And considering that Apple has one of the most stable markets (loyal fans, consistent pricing and consistent quality) and that market is large enough to weed out most regional irregularities, slowing growth is important even if it doesn't mean that the business shrank.
Short term investors would probably be wise to buy now. Long term investors should probably jump ship. And the other players in the market should probably be concerned as well.
I could be wrong. The miss wasn't huge percentage-wise and there are probably some localized factors which could be to blame, for instance, China recently had some bad economic news and they are a big market for iPhone's. But, I'm not sure that was far enough back to have had time to impact these numbers substantially or even if that was big enough to hurt their sales there. But such widespread economic troubles are generally the only sorts of things that affect momentum in a company with the brand stability Apple currently has. We certainly haven't seen any major new players or market upsets recently. So, unless Apple is simply losing those sales to Android it seems like the smartphone market is starting to reach saturation and/or slowing down.
And that is what long term investors and the rest of the industry should be afraid of. If this is a sign that the market is slowing down, it will affect all major players in the long run. And for a company like Apple who presently makes the lions share of its earnings off of its smartphones would be a bad long term investment.
In the short term however, Apple is probably a good buy. Sales didn't miss the mark by much. Apple will still be ludicrously profitable for the remaining future and both Apple and industry analysts will adjust projections and based on the new model and thus Apple will likely meet or exceed those projections in short order, driving the stock back up. Basically, you're gambling that the sales don't appreciably decelerate, which is probably a safe bet for Apple. So if you're in the market for Apple stock, they probably won't go much lower than where they are now, and if you hold onto until the next major product release (iPhone 7) you're probably not exposing yourself to much risk.
No guarantees though. It is wholly possible that smartphone sales will shoot through the floor. In my opinion, smartphones haven't markedly changed in several years now. It is possible that people are just getting less excited about upgrading as soon as possible and are holding onto phones longer now. But, phone subsidies are still a thing, so even if people aren't thrilled about new phones any more, they probably still pick them up as soon as they can.
The other reason Apple specifically should be concerned is that they (idiotically) made an iPhone a pre-requisite for an Apple Watch. If sales of new phones compatible with their watch slow down, then it will have a trickle down effect to dependent devices as well, which would hurt their already hurting Watch sales.
Amusingly, Microsoft was ahead of this if it turns out to be a market-wide problem. Though their reasons for changing are different. By reducing their portfolio of new phones they should be able to increase profit margins even on lower sales.
Google has nothing to fear however. They aren't a handset maker, and an overall decline in hardware sales, as long as it doesn't affect their percentage of the market share is meaningless.
But players like Samsung, Motorola and other handset makers will probably be looking over their numbers to see if they are experiencing a similar trend or not.
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