Apple shares rebound slightly as analysts cut forecasts
Apple shares ticked back up a couple of percentage points Wednesday after disappointing quarterly results sent them plunging more than 8% in late trading the day before.
Only a handful of public companies have ever reported more than $10 billion in profit in a three-month period. Apple did just that for the sixth straight time Tuesday, pushing its pile of cash and securities to $233 billion.
But investors fear Apple’s incredible 13-year run of value creation -- from the iPod to the iPhone to the iPad -- is over for good. With more than 1 billion users of those and other Apple products, the company is now struggling to grow hardware sales.
Even China, where skyrocketing iPhone purchases fueled recent surges, is no longer a safe bet for Apple.
Sales in greater China, which includes Taiwan and Hong Kong, fell faster than any another region in the first quarter. The company blamed the decline in large part on a strong Hong Kong dollar, making the iPhone too expensive for tourist purchases there. Mainland China sales still sunk 11% compared to the same period a year ago, which analysts said marked the first-ever quarterly decline in the country for Apple.
Some experts maintain hope for blockbuster sales of a new iPhone model this fall.
“We believe an iPhone 7 launch in late September will allow [the company] to return to growth,” said Angelo Zino, equity analyst at S&P Global Market Intelligence, who maintains a “strong buy” rating on the company’s stock.
But there is increasing concern that, like last year’s iPhone 6s, the newest model won’t be radically different from its predecessors, which could deter prospective buyers. Skeptics have pushed their predictions for a full Apple rebound to 2017.
“If iPhone 7 doesn’t surprise with meaningful new useful features, we worry that consumers won’t upgrade,” Macquarie Capital analyst Ben Schachter said in a note this week. “And unfortunately, nothing that we’ve seen about iPhone 7 thus far strikes us as particularly innovative. Apple will be a show-me story until then.”
The mixed sentiments have left Apple shares in a wobbly position, down more than 26% from their 52-week high. They closed Wednesday at $97.82, down 6.3%, or $6.53.
Several analysts said Wednesday that they were reducing earnings forecast for the rest of Apple’s fiscal year, which ends in September.
For instance, Zino said earnings per share for the fiscal year would hit $8.28, down from an earlier $9 estimate.
Sales and earnings are being affected in part by the popularity of more inexpensive versions of the iPhone and by the lack of profit-margin growth from Apple’s services business despite a double-digit sales increase.
“The bottom line is that [Apple] needs new innovation either in its current categories or in entirely new products (car?) in order to drive consumer and investor excitement,” Schachter wrote.
Twitter: @peard33
UPDATES:
1:34 p.m. Updated with closing share price data.
The original version of this article was published at 10:09 a.m.
