Apple Inc. (AAPL) has lost a whopping $230 billion in value since peaking less than a year ago, and there’s little hope that upcoming Apple earnings for its fiscal first quarter can arrest a plunging AAPL stock price.
AAPL is off more than 25% since its all-time high in April. That’s like torching an entire Wells Fargo & Co (WFC) or an AT&T Inc. (T).
Partly that’s because AAPL is coming off an incomparable market capitalization of more than $760 billion in last spring.
It’s also due to the fact that Apple stock was one of last year’s big tech stocks — a group that also included “FANG” companies Facebook Inc (FB), Amazon.com, Inc. (AMZN), Netflix, Inc. (NFLX) and Alphabet Inc (GOOG, GOOGL) (It was Google when the acronym came about) — that carried the market for much of the year.
But the really big headwind is the poor performance of the iPhone 6s and iPhone 6s Plus. The Apple stock price started to weaken at the end 2015 when concerns surfaced over the popularity of the latest iPhone, and now Apple earnings are going to prove those worries right.
AAPL lives and dies by iPhone sales — and average selling prices — and in some ways the new iPhone never had a chance. The original iPhone 6 was simply too big a hit. Indeed, iPhone 6s and iPhone 6s Plus aren’t just competing with tough year-ago comparisons, they’re fighting the old iPhone 6 to this day.
AAPL Is Its Own Toughest Competition
Analysts are warning their clients that average selling prices (ASP) are falling at Apple because consumers are still picking up somewhat less expensive iPhones from last year. ASP is critical when your business essentially rests on being able to charge more for premium products.
The shipments just aren’t there either. Analysts are cutting their forecasts amid reports that AAPL has had to scale down production in order to let dealers catch up.
It could get ugly. Although Q1 iPhone shipments are expected to remain steady at about 75 million year-over-year, the current period isn’t looking so hot. Noted Apple analyst Gene Munster of Piper Jaffray says the market in AAPL stock is steeling itself for iPhone sales as low as 50 million for the March quarter. Analysts’ average view is for sales of 58 million, down from more than 61 million last year.
Thankfully, all is not lost for AAPL. Far from it. For one thing, Apple loves to lowball guidance, and with analysts tripping over themselves to slash projections, the tech company has a good shot of beating Street expectations.
For the fourth quarter, analysts expect Apple earnings to rise 5.6% to $3.23 a share from $3.06 a share last year. Revenue is forecast to increase just 2.8% to $76.67 billion.
Even more important is what Apple can tell us about the current quarter, which is when the brunt of the iPhone falloff is expected to be felt. First-quarter revenue forecasts actually call for a 3.3% drop in the top line.
So, hey, at least some of the pessimism is priced in.
Bottom Line for AAPL Stock
The true savior of Apple stock — as always — is going to be this year’s launch of iPhone 7, but that’s still a long way off. Until then, investors are just going to have to ride it out.
As for new money interested in AAPL?
A great company keeps getting cheaper and cheaper, and you’ve got to love that.
EDITOR’S NOTE: This story has been corrected to reflect the fact that Apple is not one of the “FANG” stocks, as well as estimates for iPhone shipments.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
