Apple Inc. (NASDAQ: AAPL) certainly hasn’t had a great start to the year.
First, reports announced that the production of flagship iPhone X would be cut because sales were not even close to expectations.
According to Statista.com, iPhone revenue accounted for nearly 70% of revenue in the latest quarter. When sales are down on the phone that is expected to carry the iPhone brand into the future, it’s not encouraging. Nor is the fact that Apple’s other hardware products are finding more competition and the premiums they commanded for years is also waning.
That means lower sales and lower margins. And no big product launches on the horizon.
Then the market sells off.
But here is where it gets interesting.
AAPL Stock Has Fallen — But Not As Far As Everyone Else
After a very volatile week — and on the heels of all this news — AAPL is off just 2.3%. That means it weathered the selloff better than Alphabet Inc (NASDAQ:GOOGL), the Dow Jones Industrial Average and the NASDAQ.
What this says is, the market is looking beyond today. Remember, the stock market is a forward looking indicator. It isn’t focused on what’s happening today, but what’s happening a quarter or two down the road.
Some are suggesting this selloff had more to with ‘buy the rumour, sell the news’ attitude regarding the tax cuts that were passed in late 2017 and buoyed the market in January.
There’s talk that the tax cut won’t get businesses rolling like many in the financial press — and Washington, DC — have promised. The tax cut was a good move for businesses, but not a game changing move that will drive the economy out of its 3% GDP range. And given the extra $1.3 trillion in debt the tax break adds to the US economy, 3% may be optimistic.
The Bottom Line For AAPL Stock
The fact is, AAPL is a diversified, global consumer electronics company. That is a very good thing. When demand falls in the U.S., there will be regions in the world where demand is high and Apple’s margins are better.
What’s more, the tax cut has allowed AAPL to repatriate a lot of assets it has held abroad. That means the company can do more than buy back stock and expand operations in the U.S.
Also bear in mind that AAPL has an $837 billion market cap. It is a massive company. One quarter doesn’t define it. Sales haven’t evaporated. It launched one phone model that hasn’t succeeded as it had hoped.
It’s not the end of the world.
That means, this is a good time to wade in and buy AAPL at a discount, while everyone is panicked. These are the times when smart investors find bargains for the long term.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.