Apple Shares Slide as Outlook Fails to Impress – Wall Street Journal
Apple late Tuesday projected revenue of $76 billion to $78 billion in the current quarter, which includes the holiday-shopping season and an expected bump from sales of the new iPhone model. Apple’s revenue range suggests an increase from the $75.9 billion in the same period a year earlier, its first such rise in a year, and above the average analyst estimate of $74.9 billion on FactSet.
“We’re confident enough to give you guidance that we’re returning to growth this quarter which obviously feels very good for us,” Apple Chief Executive Tim Cook said on the company’s conference call.
Still, investors expected more. Ahead of the earnings report Tuesday, Apple’s share price had risen 15% from a recent low Sept. 9, two days after unveiling the latest iPhone. Expectations were heightened based on reports of strong demand for the new iPhones and problems at its chief smartphone rival, Samsung Electronics Co.
Following the company’s quarterly update, Apple shares Wednesday hit an intraday low of $113.31 before rebounding to $114.82 in late morning trading in New York, down 2.9% on the day. Apple’s stock remains up 9% in 2016 but down 13% from its all-time high of $131.45 in May 2015.
Apple’s revenue estimate suggested 76 million iPhone sales in the holiday quarter. While that is higher than the 74.8 million sold in the year-ago quarter, Stifel analyst Aaron C. Rakers noted that the company’s current quarter will include an extra week, padding the iPhone sale results. The analyst on Wednesday downgraded the stock to hold until there is more evidence of a growth driver for the company.
Samsung’s decision to cancel its Galaxy Note 7 smartphone after a series of battery fires and overheating incidents was seen as a possible driver for iPhone sales, but the impact was less clear Tuesday. Asked in an interview how Samsung’s problems influenced Apple’s outlook, Mr. Cook said, “We’ve had a large number of Android switchers that are looking for better experiences. We want to offer anybody who would like to come over a great experience.”
Over all, Mr. Cook said the response to the iPhone 7 “has really been off the charts” and “demand continues to outstrip supply.“ He said there are waits for some models, particularly the high-end iPhone 7 Plus. Neil Cybart, an independent analyst who follows Apple, said there is an eight-week wait for some models.
Apple has grown to be the most valuable company in the world over the past decade on the tremendous success of the iPhone. But that formula proved less effective in the past year amid lukewarm sales of the iPhone 6S models and slowing growth in smartphone sales world-wide, especially in China, Apple’s biggest growth market in recent years.
The iPhone accounted for 63% of Apple’s revenue in the just-completed fiscal year, but growth in the smartphone market has slowed recently and consumer buying habits are changing. In the fourth quarter, Apple said it sold 45.5 million iPhones, 2.5 million fewer than a year earlier.
The company faces multiple challenges as it looks to augment the success of the iPhone. Sales of Macintosh computers, for which Apple is expected to introduce new models later this week, fell 17% from a year earlier. IPad sales, which have fallen in recent years, were flat. Sales of Apple’s “other products” category, which include the Apple Watch, fell 22% from a year earlier. And Apple’s secretive automotive project has yet to produce results.
Mr. Cook on Tuesday, though, touted improvements in the company’s services business, which includes Apple Music, iTunes and the App Store, where revenue grew 24% from a year earlier. Apple Music revenue rose 22%, Mr. Cook said, calling services “our huge highlight in the quarter.”
Plus, Apple remains the most profitable U.S. company, with net income of $45.7 billion for the fiscal year it just ended. The company reported holding $237.6 billion in cash and investments, up from $231.5 billion three months earlier.