Why Apple’s Share Value is Suffering from the Over-Dependency of the iPhone
Apple is capitulating, and the reasons couldn’t be clearer than a sunny summer day.
Indeed, the stock, which was once believed to be impermeable to the volatile nature of the stock market, has lost a whopping $100 billion from its monumental $1 trillion market valuation.
Abysmal Trading for the Company’s Stock
In fact, it is currently heading for its eighth week of subsequent declines since its abysmal trading during the 2008 financial crisis.
So what is the main reason for this poor performance? It all falls back down to the iPhone.
For instance, on Nov 1st, when Apple released its fourth-quarter earnings, the company reported earnings that were significantly lower than the iPhone shipments that were expected to be made in their fourth straight quarter. Indeed, analysts warned that Apple should experience lighter sales this festive season.
Moreover, in what was considered a surprising announcement, the company said that it would cease from reporting the individual sales, as well as the revenue figures of the iPhone. After the announcement, the company’s shares decreased by a whopping 6.6 percent in the subsequent trading session.
Supply-Chain Rumors Have Further Crippled Its Stock Market Share Value
If that wasn’t enough, Apple was further hit by speculation and supply-chain rumors that it was cutting back on the number of components that it had ordered for its new set of iPhones.
From the news, the stock was further hard-hit, capitulating by 5 percent the previous week after four suppliers of the iPhone minimized their revenue forecasts!
According to managing director in charge of equity research at Wedbush Securities, Dan Ives, he expressed the negative sentiment that was coming from investors since the company’s decision from 2015.
Indeed, it seems like every bearing is coming out of place!
That being said, Apple has had its share of supply-chain rumors over the years, ever since it’s been fighting the stagnation of its iPhone sales in subsequent quarters.
Nevertheless, it is the absence of any encouraging data points, the complexity if reports, and the floury of bad news that has weighed heavily on the performance of the company’s shares.
Keeping Its Sales Statistics from the Public
In terms of sales, Apple’s decision to keep iPhone sales under lock and key has sparked a lot of concern regarding its biggest revenue segment.
For instance, in 2008, during the company’s first sales of iPhones, the smartphone constituted about 5.7 percent of the company’s overall revenue.
In 2009, the percentage tripled. By 2015, when the hype of the iPhone was at its peak, nearly $2 out of every $3 going to Apple as revenue and profit originated from the iPhone.
That being said, the effects of lengthier upgrade cycles as well as global market saturation have affected the sales of the iPhone.
Moreover, there have been reports of lighter sales emerging in influential international markets such as India and China. Such statistics have heightened doubt as to whether Apple will be able to sustain its growth in the smartphone industry on a long-term basis.
Indeed, for quite a number of years, the Apple story has revolved around the iPhone. As a matter of fact, the iPhone was so revolutionary at its peak that it even led to declined sales and eventual loss of interest in the iPod. Moreover, it has also been the epicenter of the latest updates made to the Mac and the iPad.
That being said, any weakness in the company’s largest company could scare shareholders and result in unwarranted public panic.
Other Apple Segments
In recent years, Apple has been downplaying the iPhone segment publicly to direct attention to its service categories, as well as other Apple products.
Services of interest include the likes of its cloud services, Apple Pay, Apple Care, and the Apple Store. Moreover, it has also directed its marketing and advertising emphasis on products such as the HomePod, AirPods, and the Apple Watch.
That being said, analysts are skeptical whether these two business segments will be able to pull in the kind of revenue that the iPhone has been pulling in over the years. Additionally, for its 2018 fiscal year, the revenue totaled $17 billion of its Other Products, while the Services revenue came to $37 billion.
In total, iPhones total revenue for 2018 fiscal year came to $167 billion.
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