Apple’s 13-Year Historic Growth Came to an End

April 27, 2016

By HV

April 27 will go down in Apple’s history as the day where the company reports its first-ever decline in iPhone sales and its first revenue drop in 13 years.

Our Sentifi machine captured an insight of an early estimate of the iPhone sales in the second quarter as early as February 18. Foxconn, one of Apple suppliers, registered a 14.75% year-over-year decline in revenue in January, which supported a speculation the iPhone sales could decline by 16.5%-23.5% year-over-year.

messages

Apple reported a 16% drop in the iPhone sales for the second quarter. It sold 51.2 million iPhones, down from 61.2 million in the same quarter a year ago. Yet, it still beat analysts’ estimates which sat at 50 million.

That sales drop translated to a 13% decline in revenue of %50.6 billion. It’s not a difficult task to point to a few factors that contributed to the end of Apple’s history growth.

First, weakness in key global markets like China persists. Sales in the Greater China region, including mainland China, Hong Kong and Taiwan, decline 26% year-over-year. In mainland China specifically, sales fell 11% due to slowing economy. To make the matter worse for Apple, China said it will place Apple under heavy scrutiny, which will prove problematic as the company can only gain so much market share before it’s met with resistance from Beijing.

Second, Apple lacks a hot product that can pry open wallets. The sales of the iWatch and the iPhone SE are respectable, but they can’t make up for the loss.

Apple forecast the revenue for the third quarter to be $41 billion to $43 billion, which is below Wall Street consensus of $47.3 billion, instilling more doubt into the investors.

apple

A combination of revenue drop and weak forecast sent the shares down 8%, below $100 for the first time since February, wiping out $46 billion in market capitalization, greater than that of nearly 80% of the S&P 500 companies.

The suppliers of the world’s most valuable company suffered collateral damage as well. Skyworks Solutions saw its shares tumble more than 5%, while shares of NXP Semiconductors fell more than 2%. Broadcom shares dropped more than 3%. Micron Technology took the least damage, with shares falling more than 1%.

Losing money notwithstanding, Apple stays optimistic about the future. Time will tell if that optimism is well-placed or foolish.

If you want to harness the wisdom and insights from the crowd to monitor your portfolio free of charge, please sign up for myMarkets.