Moffettnathanson Apple Q4spanglervariety – Apple just released their fourth quarter earnings report, and the numbers are shocking. The world’s most valuable company lost $10 billion, or 10% of its market value in a single day. And what was the cause?
There is less supply than expected of the new iPhoneX model, and more demand than anticipated for the iPhone8 and 8+, making it difficult to meet both markets. Apple must have known this would happen because they reduced production to make new products more profitable. If Apple could meet demand, they wouldn’t need a price increase.
Apple blamed external factors for the loss but wouldn’t say what those factors are.
Apple was caught in a supply chain nightmare. After all of the hype the company put behind iPhone X, the iPhone8+ was sold out by all networks and Apple stores, so Apple decided to cut production of the iPhone8+ to make new smartphones more profitable. Since Apple took the profit from the cut, they had to increase prices.
The shortage of iPhone X is a self-made disaster. Apple kept the hype going until it was almost too late to get an order in for Christmas, and as soon as it became clear customers would be unable to get the phones for Christmas, Apple announced a price increase.
Apple’s biggest value product right now is the Macbook Air, at $1200, only slightly more than the cost of an iPhoneX. The price increase is a necessity, because Apple can’t profit on the low-end of the iPhone 8+.
Apple has had a rough quarter, with lower than anticipated sales of the Mac Mini and iPad Pro. The iPhone8+ sells in fewer numbers than Apple would like.
Apple tried to turn their supply chain nightmare into a positive, saying “we’re thrilled to report that our holiday quarter results generated Apple’s highest quarterly revenue ever, and broke multiple records along the way.”
Apple’s stock price took a hit after the earnings report, but it’s not a long-term problem for the company. Apple said “the only way for us to successfully make innovative products is to singularly focus and that is what we do best.” The tech giant wants to “stay focused on making the best products, services and customer experiences in the world, and keep making them better all the time.”
Market analysts have been quick to predict doom and gloom for Apple, but the truth is that Apple’s quarter was pretty much identical to 2016, when Apple’s stock price fell 18% due to a drop in iPhone sales.
If you are one of the millions of Apple users out there, this may seem like bad news. But don’t worry, 2018 will be a much better year for Apple.
Apple has the opportunity to take a larger share of the smartphone market, which they are falling behind on. With so many new products hopefully ready to release before the end of 2018, Apple should be able to catch up and outgrow Samsung in a few months.
Apple’s stock price is notoriously volatile, but as long as they make great products it’s worth owning. Don’t worry too much about Apple stock price, just expect it to go up again at some point this year.