Apple Inc. (NASDAQ: AAPL) has been one of the darlings of the investment world. Increasing value by more than 13% in the past 12 months, Apple has been seen as one of the more stable investments in the tech industry. This year however, and particularly in this last week, stock price has been decreasing. Even as the company has made gains at the close of trading on some days, investors are still looking at a -3.72% stock value for the year to date, and a worrying -8.38% slide over the past five days.
What are the factors leading to the decline?
Although Apple designs products in Cupertino in California, their main iPhone line is assembled overseas using parts from international suppliers. This week, warnings have emerged from two key suppliers, telling investors that smartphone demand could stagnate in the next 12 months. iPhone shipments are expected to decrease, and this is bad news for Apple investors. Stock market value has declined by around $80 billion in the past five days.
Some analysts believe that iPhone shipments could decrease by 9 million units this fiscal year, which would make it hard for the company to grow revenue, forcing them to rely on other products and services.
Apple’s iPhone line is responsible for two thirds of the revenue that the company generates. The majority of the rest comes from laptop, tablet, and desktop computer sales. Apple also generates revenue from iTunes digital media sales.
Investors are concerned that with a decline in iPhone demand, Apple could find it difficult to increase total revenue growth.
Is it All Bad News for Apple?
Apple is often recommended as a strong tech stock that is resilient to wider market conditions. At this time, long term investors are still profiting, as it’s YTD growth is still in the positive numbers.
There will also be dividends for eligible shareholders as the company repatriates more than $200 billion in cash holdings that have previously been held overseas. Despite smartphone sales slipping, the company is still expected to reveal increased revenue for this quarter, with growth of over 10%.
Apple will reveal full details next week when they make their quarterly financial statement.
Analysts still rank it as ‘OVER’, meaning that it’s a strong stock to hold. It’s one step away from a ‘BUY’ rating, so current investors are in a good position. At least for the meantime, investors should be cautious of buying new stock in the company. First quarter financial results will reveal more details about the company’s financial position and their strategy for the immediate future.
An 8% decline in stock value over five days is definitely something to take note of, but there’s nothing to suggest that it won’t be able to recover, and their business is diverse enough that lost smartphone revenues can be made up in other areas.
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