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Tue, December 7 at 7:00PM ET

Apple Inc. (AAPL) Stock Is in a World of Hurt

Apple Inc. (NASDAQ:AAPL) stock is down for the fifth time in five days since delivering a disappointing fiscal fourth-quarter earnings report. Yet again, a week after reporting its fourth-quarter earnings. AAPL stock has lost about 6% in that time, and worse, the losses are starting to accelerate today.

Apple Inc. (AAPL) Stock Is in a World of Hurt

Apple has made it a habit of reporting discouraging numbers for almost a year now. Long gone are the days where it wowed audiences with breakthrough advances on its iPhone, as are the days of Street-smashing results.

Still, AAPL stock had at least given investors a taste of the old days, doubling up the market with 12% gains for the year-to-date up until its earnings report.

That ended when Apple announced Q4 earnings that just snuck by market expectations. AAPL earned a per-share profit of $1.67, off from $1.96 a year ago, and just a penny ahead of estimates. Meanwhile, revenues of $46.9 billion in sales marked the company’s third straight quarter of revenue declines, and a significant step down from the year-ago period’s $51.5 billion.

The main culprit: iPhone sales.

iPhone 7 Sales Decline in China

Apple’s flagship product is hitting a headwind it can’t push back against — saturation. In Q4, Apple’s iPhone accounted for 46.5 million units sold, which was ahead of what analysts predicted (44.6 million). However, China sales declined from $12.5 billion to $8.8 billion.

This didn’t slip past CEO Tim Cook, who offered this:

“Also, as you probably know, the fiscal year 2016 performance was hurt by the devaluation of the currency, which affected it about 3%, so the underlying business performance was 14% down. And so why was it down? There’s lots of reasons, but the largest one, in our view, is that when you look at what happened in 2015 in China, we had a surge of upgraders that came into the market for the iPhone 6 or iPhone 6 Plus, and the upgrade rate increased relatively more in Greater China than elsewhere around the world. And so, when that upgrade rate in fiscal year 2016 returned to a more normal upgrade rate, which would be akin to what we saw with the iPhone 5s as a point, it had further to fall.”

And while the semi-annual Evidence Lab Global Smartphone Survey by UBS indicates that iPhone sales will pick up in the U.S. over the next year or so, retention in China is slipping. Analyst Steve Milunovich sees a single-digit drop in iPhone sales in China with a lengthened upgrade cycle.

That seems to jibe with the Fool’s assertion that while smartphone shipments in China grew by 15% year-over-year, Apple’s iPhone still dropped from 10% to 6% market share in the country.

Microsoft Is Eating Apple’s Lunch

Clearly, Apple needs to strengthen its other line of products or introduce something new, because the Apple Watch isn’t doing it. It had just that chance on Oct. 27, a day after Microsoft Corporation (NASDAQ:MSFT) unveiled its lineup of innovative products, including the Surface Studio.

Instead of reinvigorating its Mac lineup, Apple looked more akin to Microsoft in its Steve Ballmer-led years than the beacon of innovation it used to be. They’ve caused at least one once-loyal Apple Mac user to rethink their allegiances.

For what it’s worth, AAPL stock is down more than 4% since its event. MSFT is level.

The AAPL Stock Chart Is Worrisome

Click to Enlarge 
A look at Apple’s stock chart isn’t going to cheer anyone up, either.

Apple shares peaked around $117.50 before its earnings report, then immediately broke below its short-term 20-day moving average.

AAPL stock has since dipped to the $112 area, home to the 50-day MA — which the stock has twice tested as support since breaching the level back in July. Meanwhile, relative strength is low but hasn’t quite yet reached oversold status.

Should Apple stock fail to bounce off its 50-day MA, it could be a long couple of weeks for Apple. Next major support is the stock’s long-term 200-day average, which sits at $102.70, or another 8% lower from here.

Bottom line? Headlines are conspiring against Apple in a bad way, and it doesn’t help that the broader market is starting to falter as the presidential election looks more in the air than it had of late. Combine those with troubling technicals, and it’s no surprise that AAPL bulls are starting to lose their nerve.

As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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