Apple Stock Slips: What's Behind the Recent Decline?

Apple Inc. (NASDAQ: AAPL) shares have been on a downward trajectory recently, with the stock falling more than 1% to 233.55 in afternoon trades on September 9, 2024. The decline has raised concerns among investors, who are eager to understand the reasons behind the stock's recent performance. This article aims to provide an in-depth analysis of the factors contributing to Apple's stock decline and its potential impact on the company's long-term growth prospects.



Soft iPhone Sales

One of the primary factors contributing to Apple's stock decline is the soft iPhone sales. Counterpoint Research reported that Apple's iPhone unit sales fell 2% worldwide in 2024, with the company's market share dropping to 18% from 19% in 2023. This decline was driven by a 2% decrease in iPhone sell-through, although consumers were pivoting to Apple's ultra-high-end models to offset some of the declines (Counterpoint Research, May 7, 2024). The weak iPhone sales have led to concerns about the company's ability to maintain its market share and revenue growth in the face of increasing competition.

Weak Guidance

Another reason for Apple's stock decline is the weaker-than-expected guidance from management. For the September quarter, Apple said it expects gross profit margins to be between 44% and 45%, with flat to slightly slower year-over-year revenue growth. Apple CFO Luca Maestri said he expects revenue for the Mac and iPad to continue falling throughout the year (Apple Inc., August 3, 2023). The weak guidance has raised concerns about the company's ability to meet Wall Street's expectations and maintain its growth trajectory.

Lofty Valuation

Despite three consecutive quarters of falling revenue, Apple's stock was up 51% year-to-date at its peak, leading its shares to trade as high as 33x times earnings. Even after the recent post-earnings stock price drop, Apple still trades at roughly 30 times earnings, which is higher than the S&P 500's 20 times earnings (The Wall Street Journal, August 6, 2023). The rich valuation has made Apple's stock more susceptible to sell-offs, as investors may be looking for more attractive opportunities elsewhere in the market.



Meta CEO's Criticism

Mark Zuckerberg, CEO of Meta Platforms (META), criticized Apple for its lack of innovation and "squeezing people" for money during a podcast interview with Joe Rogan. He said Apple hasn't invented anything great in roughly two decades, since Steve Jobs created the iPhone (CNBC, September 9, 2024). The criticism from a high-profile executive has raised questions about Apple's ability to maintain its competitive edge and continue to innovate in the face of increasing competition.

Missed Earnings and Revenue Expectations

In a rarity for the tech giant, Apple missed Wall Street’s earnings and revenue expectations for its first quarter, reporting earnings per share of $1.88 and revenue of $117.15 billion. Both income and revenue came in below the year-earlier totals of $2.10 and $123.9 billion (Apple Inc., February 3, 2023). The missed expectations have raised concerns about the company's ability to maintain its growth trajectory and meet investor expectations.

Geopolitical Uncertainties

Geopolitical uncertainties, particularly the situation in China, have also played a role in Apple's stock performance. Soft iPhone sales in China, weak guidance for the region, and criticism from Meta CEO Mark Zuckerberg have all contributed to Apple's stock decline. The situation in China, in particular, has been a significant headwind for Apple, as the company's revenue in the region missed expectations by about $1 billion (Apple Inc., August 3, 2023).



Impact on Long-Term Growth Prospects

Apple's earnings and revenue misses in its fiscal 2023 first quarter have raised concerns about the company's short-term performance. However, the impact on its long-term growth prospects is less clear-cut. Apple's services segment saw revenue increase by 6% year-over-year, which is a positive sign for the company's long-term prospects. Additionally, Apple's revenue decline may be a temporary setback rather than a long-term trend, as supply chain issues and unfavorable currency rates contributed to the decline (Cook, 2023).

Many big-name analysts remain upbeat about Apple's long-term prospects, with Wedbush tech analyst Dan Ives (2023) believing that iPhones and Services should be stronger than expected and remain the core of the Cupertino growth story. Bank of America analyst Wamsi Mohan (2023) also believes that Apple's services business revenue can continue to grow due to improving trends in advertising, mobile gaming, and App Store sales.



In conclusion, Apple's recent stock decline can be attributed to several specific factors, including soft iPhone sales, weak guidance, lofty valuation, Meta CEO's criticism, missed earnings and revenue expectations, and geopolitical uncertainties. While these factors have raised concerns about the company's short-term performance, the impact on its long-term growth prospects is less clear-cut. Apple's services segment growth, the temporary nature of the revenue decline, and the positive outlook from analysts suggest that Apple's long-term growth prospects remain strong. However, investors should continue to monitor the company's performance and any potential headwinds that may arise in the future.