Apple's uncommon five-day stock slide has drawn attention, with its three consecutive quarters of declining revenue shaking investors' confidence. Now, all eyes are on the upcoming iPhone 15, set to be revealed next month, which will be critical in determining if the tech giant can turn the tide.
By the close of trading on Monday, Apple's share price had declined for five consecutive days, accumulating a near 9% drop. Overnight, Apple shares dropped 1.7%, in contrast to the Dow Jones, which rose by 1.2%. This made Apple the worst-performing stock in the Dow for the day.
This downward trend intensified following Apple's third-quarter earnings report. Last Friday, Apple's shares plummeted by 4.8%, bringing its market value below $3 trillion. This marked its biggest single-day drop since September 29 and the first time this year the stock closed below its 50-day moving average.
Historically, Apple has been a consistent performer in U.S. stocks, delivering an annualized total return of 29% over the past decade, far exceeding the S&P 500's 12% and the Dow's 11%. So what caused this shake-up in investor faith?
While Apple's earnings per share for the second quarter exceeded expectations, its total revenue decreased by 1.4% year-over-year. This marks the first time since 2016 that the company has seen three consecutive quarters of revenue decline. Revenues from all hardware products, except for Mac computers, dipped, with iPad revenues taking a dramatic 20% plunge.
Even more striking, Apple was the only company among its competitors to experience two consecutive quarters of declining revenue. During the earnings call, Apple's outlook was hardly upbeat, with executives anticipating third-quarter results similar to the second quarter, assuming the overall economic climate doesn't worsen.
Additionally, Apple's high valuation has made investors wary. Its forward price-to-earnings ratio for the upcoming 12 months stands at 28, higher than its five-year average of 23.2 and significantly above its lowest mark of 10.8.
Now, Apple is under pressure to release a new blockbuster product to justify its high valuation, and the upcoming iPhone 15 is burdened with high expectations.
Reports suggest that the iPhone 15 is set to launch on September 22, with the holiday quarter ending on December 31 being a crucial period to gauge demand. The sales performance of the iPhone 15 will largely influence the future trajectory of Apple's stock.
On the bright side for Apple, last year's lower benchmark figures, due to supply chain disruptions, may help. However, challenges remain as currency fluctuations in major overseas markets might impact Apple's foreign earnings.
Earlier this month, often touted as the "most accurate Apple analyst", Ming-Chi Kuo predicted that the demand for the iPhone 15 series will be lower than this year's iPhone 14 series. He mentioned that although shipments declined in the fourth quarter of 2022, the majority of component shipment plans remained largely unchanged. Unless the iPhone 15 outperforms market expectations post-launch, many suppliers could face growth pressures in the latter half of the year, given the expected lower demand for the iPhone 15 compared to the iPhone 14.
