Apple (NASDAQ:AAPL) reported its Q4 earnings yesterday, and despite topping expectations for both revenue and profit, Apple stock has been taking a beating in after hours trading. At one point, AAPL was down over 7%.

Sales of iPhones were flat and the company’s projected numbers for the holiday quarter were lower than analysts were looking for, which didn’t help. And in a smartphone market that continues to weaken, the company also announced it will no longer release iPhone sales numbers. Or any individual product line sales numbers…  

Apple Stock Takes a Dive, Despite Q4 Numbers 

Apple reported its Q4 results yesterday evening and there was some good news for investors. Highlights spiked out by the company for the record-breaking quarter included revenue that was up 20%, a 41% increase in EPS and Service revenue that hit the $10 billion mark for the first time. In addition, AAPL says Mac revenue also broke all-time quarterly records, while iPhone and wearables revenue both set Q4 records. In addition, the average sale price (ASP) of the iPhone shot up to $793 on the quarter. That’s up 28% from last year’s big jump, and way above the $750 range that analysts were expecting.

That all sounds pretty positive, so why is Apple stock being hammered?

iPhone Miss, AAPL Holiday Guidance and the End to Reporting of Product Shipments 

Apple released guidance for Q1 2019 that has revenue between $89 billion and $93 billion. That’s slightly lower than analyst expectations of $93.02 billion. And iPhone sales were lower than expected (46.89 million versus 47.5 million), although iPhone revenue was way up at $37.2 billion (compared to $28.8 billion last year), despite the flat growth.  

But the big story is the company’s announcement that starting in Q1, it will no longer break out quarterly unit sales numbers for its products. Investors are worried this is a signal from AAPL that iPhone sales are moving from an era of stagnant growth to one of decline.

Back in 2016, AAPL announced it would no longer release launch weekend iPhone sales numbers. That was a metric that investors had relied on, with Apple smashing records year after year. The decision to stop providing that information was taken as a sign that the days of massive iPhone growth were over. No one wanted investor panic if a new iPhone actually failed to beat the launch numbers from a previous year. In Q4 2017, worldwide smartphone sales recorded their first ever quarterly drop. Any hope that was an anomaly were shattered yesterday when IDC released its report for Q3 2018, showing a 6% year-over-year decline, making four straight quarters where global smartphone sales were shrinking.

That’s a trend, and the trend is not good. At least not if you’re an AAPL investor. Launch weekend sales are one thing, but this is a trend that that spells trouble for quarterly iPhone units sold.

The Age of Record iPhone Sales Growth Is Over, But That’s OK

The phenomenal increase in Apple stock that made it a trillion dollar company was fuelled by iPhone sales that grew at a rapid pace. It makes sense that with the smartphone market softening, the company would try to shift investors focus from that one number. Apple faces similar challenges in other hardware divisions: in Q4 the number of Macs and iPad sold both dropped compared to last year. 

There was some good news in Other Products, which saw 31% revenue growth — but Apple doesn’t release unit sales for that division, so we can’t really tell if Apple Watch sales were up, or if the HomePod was a failure. All we know is revenue grew in a big way. And that’s what AAPL would rather have investors focus on going forward: revenue instead of unit sales numbers. Doing so not only helps to hide a slide in unit sales (avoiding investor panic), it also makes it tougher to point to specific products as flops.

Now that the days of record iPhone sales driving Apple stock are over, the company would rather investors not gauge the performance of the company and its valuation on whether it booked a big increase in number of units sold.

And with new Apple product releases including the iPhone XS Max, Apple Watch Series 4, the latest iPad Pro and the new MacBook Air all seeing big price increases, it’s clear AAPL has no plans to rely on sales volume alone to boost those revenue numbers.

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