As one of the biggest names in the global tech sector, whatever happens with Apple, the world usually watches with anticipation. Shareholders will have plenty of cause for concern though, as their most recent set of quarterly results revealed a mixed picture. Despite beating market expectations by posting earnings of $14.50 per share, but sales of the iPhone 5 were poor.
Wall Street analysts predicted that in the three months just gone, Apple would sell 55 million phones, but the tech giant only managed to shift 51 million iPhones worldwide. Meanwhile, sales of iPads stood at 26 million while they managed to sell 4.8 million Macs in the previous quarter. Not long after the announcement, shares fell by 5% despite results not being quite so bad.
As their most popular product, the performance of the iPhone tends to dictate Apple’s fortunes. With total sales of the product a little lower than anticipated, it shows that the momentum of the past decade or so has slowed significantly, even though sales in emerging markets such as China and South America are on the up. Two new versions of the iPhone are due for release in the near future.
Due to a combination of disappointing iPhone sales and competition from the likes of Samsung and HTC, many investors may begin to wonder whether it’s actually worthwhile keeping their money with Apple or if it’s time to get out while they still can. However, prominent shareholder Carl Icahn recently announced via Twitter his intention to buy $1bn in shares.
To try and gauge whether or not investing in Apple is still worthwhile, a lot is likely to hinge on their performance in China. As the smartphone market there is yet to fully develop, a recent deal signed with China Mobile could help to counterbalance falling sales in areas
such as North America and Western Europe, where they have been fought hard by Samsung et al.
According to Joshua Raymond, Chief Market Strategist for City Index “The problem investors are having with Apple for the last few years is that every time they see a bright spark, they get disappointed. Part of the reason comes down to the fact that Investors have gotten used to having extremely high expectations with Apple, particularly given its share price has rallied from $10 a share to a high of over $700 in the space of just 8 years”. According to
“Recently Apple announced the hotly anticipated deal with China Mobile, the world’s biggest mobile network, which investors hoped would light a fire under Apple’s battle to enter into the major phone players in China, a market dominated by Samsung. The deal is a potential game changer for the tech giant. Tim Cook said to investors that they have had an incredible start to the year in China and expect the up take to gather pace as their handsets become available in as many as 300 cities by the end of the year”.
However, whilst the long term potential for extra revenue growth in China remains attractive, the issues in the short term continue to dominate, with weaker than expected sales of iPhones in the quarter and weaker projected sales for the second quarter dampening any positivity from the report. Given the fact shares have rallied from below $400 a share to over $560 in the last six months, investors have been looking for reasons to lock in profits or qualify further buying. This earnings result gave them the former.
In the next quarter or two, it might be worthwhile for anyone considering putting their money into Apple to bide their time. Seeing how their share price is able to respond following their most recent setback could provide all the answers that traders could possibly need. As for Apple themselves, trying to claw back lost market share in their core markets is imperative for trying to stop the rot.