Apple (AAPL) Tumbles 4% on Falling iPhone Sales, China Slowdown and Lack of Guidance

Shares of Apple (NASDAQ: AAPL) are down 3.7% in pre-open trading Friday after the company reported that iPhone sales plunged more than 20% year-over-year in their latest quarter. The tech giant also skipped providing guidance due to the pandemic.

Apple reported better-than-expected Q4 sales in the services, Mac, iPad, and Other Products categories to help offset lower iPhone sales. EPS came in at $0.73 vs $0.70 estimated while revenue grew 1% to $64.70 billion to top the market consensus of $63.70 billion.

Gross margin stood at 38.2% vs 38.1% expected from the market. iPhone revenue came in at $26.44 billion, which is lower than the market consensus of $27.93 billion and a 20.7% drop compared to a year ago.

“We launched new iPhone models in October, a few weeks later than last year's mid-September launch. Up to that mid-September point, customer demand for iPhone was very strong and grew double digits,” CEO Tim Cook said during a call with investors.

Similarly, investors were unimpressed that Apple’s sales in greater China tumbled over 28% to $7.95 billion from $11.13 billion a year before.

“A larger percentage of China revenue is made up of new iPhones. And so that’s the reason the number for the total quarter started with a minus sign. But given what we see in the early going with the new iPhones, we’re confident we’ll grow in Q1,” Cook told CNBC.

Apple also didn’t offer guidance for the fiscal first-quarter of 2021 amid the growing uncertainty due to the pandemic.

“If you look at the case count, the case counts are climbing in Western Europe. They’re climbing in the United States. And so there’s still a sufficient level of uncertainty out there… we don’t believe that’s an environment to guide into,” Cook said.

Bernstein analyst Toni Sacconaghi described the last quarter as “solid but not spectacular”.

“Revenues and EPS modestly eclipsed expectations as Mac and iPad surged, while iPhone revenues declined and were weaker than consensus, which we attribute to distorted seasonal demand due to the timing of the iPhone 12 launch. China was notably weak in the quarter (-29%) reflecting its high mix of iPhone,” he wrote in today’s note.

Laura Martin, an analyst at Needham, reiterated a “Buy” rating and the price objective of $140.00 per share as she is “not concerned with weaker y/y iPhone revs and China sales down.”

“We argue that the best way to think about AAPL’s valuation, pricing power, competitive advantage period and barriers to entry is through the lens of nearly 1B of the wealthiest consumers in the world using AAPL devices over 3 hours per day,” Martin said in a note to clients sent on Friday.

You May Also Be Interested In

• Maxim Group Starts Apple (AAPL) at Hold, 'Dead Money'
• Active options: TSLA AAPL NVDA AMD BAC AMZN AMC COIN
• Cleveland Research Upgrades Dynatrace Inc. (DT) to Buy, 'optimism underlying fundamentals are likely to support upside'