Why the iPhone 6S Might Be Devastating to Apple Stock

The Apple (AAPL) stock price has taken a beating recently. Not a horrible beating by any means, but the stock is still firmly in “correction” territory.

Apple stock earnings aapl stockIn the nearly two months its July peak, the AAPL stock price has lost about 12%, or double the 6% fall of the S&P 500. And if analyst suspicions about iPhone 6S sales numbers are correct, Apple’s decline could get worse still.

Shares are down about 1% in early trading Thursday morning, spurred by comments from Pacific Crest analyst Andy Hargreaves, who is skeptical about just how well the newest iPhone iteration is selling.

Lower Sales Than the iPhone 6?

Apple, who is competing against the likes of Google (GOOG, GOOGL), Samsung (SSNLF) and (to a much lesser extent) Blackberry (BBRY) for supremacy in the handset and mobile OS market, comes out with a new iPhone each year, and each year, the unveiling event is a spectacle to behold.

This year, however, Apple’s event was less-than-extraordinary. The iPhone 6S didn’t seem to be much of an improvement over the iPhone 6 — a fact that became painfully obvious when AAPL CEO Tim Cook began bragging about how one of its new features made selfies easier to take.

The fact that the iPhone 6S and iPhone 6S Plus both now come in a new color (rose gold), and feature an improved 12-megapixel camera aren’t exactly the sort of monumental innovations we’ve come to expect from Apple. That fact was hashed out pretty immediately by Wall Street, as the AAPL stock price took a 2% dive in the wake of the presentation.

And if Pacific Crest’s Andy Hargreaves is onto something, the recent AAPL stock slump could intensify.

Hargreaves believes that demand for the iPhone 6S may actually be “meaningfully” lower than demand for the iPhone 6.

“Google search data, device shipment times, third-party surveys, a lack of comments from carriers and a lack of quantitative comment on pre-orders in Apple’s statement” are a few of the data points he used to reach that conclusion, according to Marketwatch.

He also dismissed the newly announced iPhone upgrade program — which I frankly view as a net positive for AAPL stock — saying that financing costs and cannibalization of users who already buy new iPhones each year will mitigate its impact on Apple shares.

If Hargreaves is indeed right, and Apple iPhone 6S sales are weaker than iPhone 6 sales, AAPL stock could plunge below the $100 level. Why?

Well, consider the simple fact that Apple relies on the iPhone for nearly two-thirds of its revenue. Not only would weaker sales send a signal to the market that the company has lost its innovative bent and is beginning to lose its “cool factor,” it could also signal the end of AAPL’s marvelous run as a growth stock.

Personally, I’m skeptical that iPhone 6S sales will come in below iPhone 6 sales, and I’m a believer in, and owner of, AAPL stock, which trades at just 12 times forward earnings.

But if Hargreaves is right, don’t expect Wall Street to take the news lightly.

As of this writing John Divine was long AAPL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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