Apple (AAPL) Stock: Is The Goliath Run Over?

Apple Inc. (NASDAQ: AAPL)

Apple is literally the largest company in the world. However, following the company’s earnings release, it looks like the door is opening for another company to ease into its place. Unfortunately, the tech giant missed the mark with regard to earnings and revenue, upsetting investors and leading to declines that would shed $40 billion + off of its stock price. Today, we’ll talk about what we saw from earnings, how investors reacted to the news, and what we can expect to see from AAPL moving forward. So, let’s get right to it…

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AAPL Earnings Disappoint

As mentioned above, Apple reported earnings for the first quarter yesterday after the closing bell. Unfortunately, the results disappointed investors. Here’s what we saw:

  • Revenue – In terms of revenue, AAPL missed the mark. While analysts were expecting that the company would generate $51.97 billion in revenue for the fist quarter, the company actually reported revenue with a total of $50.56 billion, missing the mark by over a billion dollars!
  • Earnings – Unfortunately, earnings per share wasn’t much better. In the quarter, analysts expected that AAPL would generate earnings in the amount of $2.00 per share. However, the company actually reported earnings $0.10 lower than expectations at $1.90 per share.
  • iPhone Sales – As if low earnings and low revenue weren’t enough to scare investors, Apple released information with regard to iPhone sales that caused quite a bit of concern. In fact, the first quarter of 2016 was the first quarter that the company ever produced a year-over-year sales decline in the iPhone. While Tim Cook believes that the company is still in “the early innings of the iPhone”, investors are taking this as a signal that the company’s tremendous smartphone market share is likely to start declining.

Following the release of earnings, Drexel analyst Brian White made it clear that he isn’t expecting to see much more positivity out of iPhone sales. Here’s what he had to say:

As the iPhone 6-Series nears the end of this two-year cycle and the macro backdrop remains challenging, volatility in Apple’s results is to be expected…”

How The Market Reacted To The News

As investors, one of the first things we learn is that the news moves the market. Any time we see positive news surrounding a publicly traded company, we can expect to see gains in the value of the stock associated with that company as a result. Adversely, when negative news hits, we can expect to see declines. In this particular case, the news was overwhelmingly bad. Not only did AAPL miss the mark with regard to earnings and revenue, the company recorded its first year-over-year decline in iPhone sales. As a result, we’re seeing declines. Currently (10:00), AAPL stock is trading at $96.64 per share after a loss of $7.71 per share or 7.39% thus far today. This equates to a loss of more than $40 billion in the company’s value!

What We Can Expect To See Moving Forward

Moving forward, I have a relatively mixed opinion of what we can expect to see from Apple. In the short term, I am expecting that economic conditions will continue to drive sales down. At the moment, we can expect further declines as investors show their disappointment with the results released. However, in the long run, I have faith that AAPL will be able to get over this hurdle. After all, it didn’t grow to be the largest company in the world without hurdles, and it knows how to make it past rough situations.

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What Do You Think?

Where do you think AAPL is headed moving forward and why? Let us know your opinion in the comments below!

[Image Courtesy of Wikipedia]

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