Normally, when a company reports earnings above of what has been estimated stock prices shoot up. This was not however the case with Apple as following the earnings conference, the share price fell more than 7% during after hours trading thus costing Apple to lose the crown of the historic $1 Trillon market cap.
The company managed to beat revenue and earnings estimations but lacked in number of Iphone units sold (details below):
• Earnings: $2.91 per share vs. $2.78, forecast by Refinitiv consensus estimates
• Revenue: $62.9 billion vs. $61.57 billion, forecast by Refinitiv consensus estimates
• iPhone sales: 46.89 million vs. 47.5 million, forecast by FactSet and StreetAccount estimates
• iPhone average selling price (ASP): $793 vs. $750.78, forecast by FactSet and StreetAccount estimates
So why did the stock fell?
Apple announced that it would be the last time the company will report the number of actual iPhone unit sales. According to Tim Cook, this data is not relevant since what is most important is the bottom line figure of what the company generated from the sales.
Apple has been struggling with unit sales of Iphones lately but still manage to generate higher than expected revenue due to the increase in prices.
Investors did not like this change as this might be a sign that Iphone unit sales will continue to decline over time.
From the conference it clearly emerged that the company is trying to make a transition from being a big hardware player to a services business, but this will of course take time for investors to get on board with the idea.
If there is not a new major hardware device, like an IPhone, in the next few years, we will not be going to see Apple’s hardware revenue growing - thus their reasoning of removing the unit sales figures from their reporting.
At the moment, every discussion on apple is always about the iPhone and for investors to start talking about Apple Pay, iTunes, Siri or Shazam is going to take some time.
I think that the stock now is in a very interesting position following the sell off and one could consider to buy but might wait a bit to let the dust settle as it might face further downward pressures.