By Jeran Wittenstein and Mark Gurman
Apple’s disappointing earnings report sent the company’s market value tumbling below $1 trillion at one stage.
Shares of the world’s most valuable public company fell over 7% at one stage after revealing stagnant iPhone sales and forecasting revenue for the US holiday quarter that fell short of Wall Street expectations.
That decline, combined with a reduction in the number of shares outstanding after accounting for repurchases during Apple’s fiscal fourth quarter, erased nearly $90bn (€79bn) in market value. Nonetheless, the shares have still gained around 25% since the start of the year.
The results drew a downgrade to neutral from buy by Bank of America Merrill Lynch analyst Wamsi Mohan, who wrote, “we are incrementally concerned that not all the weakness is captured in the near-term and we are likely to see further negative estimate revisions”. Apple, which topped the $1 trillion mark in early August, had a market value of over $1.07 trillion at the close of trading on Thursday, just before it announced the latest figures.
In its fourth quarter, Apple said iPhone unit sales barely grew from a year earlier, even though new flagship devices came out in the period. At the same time, Apple said it would stop providing unit sales for iPhones, iPads, and Macs in fiscal 2019, a step toward becoming more of a services business. While some pundits praised the move as a way to highlight a potent new business model, many analysts complained it was an attempt to hide the pain of a stagnant smartphone market.
The reduced disclosure “raises the spectre of a sustained iPhone downturn”, said Nomura Instinet analyst Jeffrey Kvaal. He said results in other Apple units “were also generally uninspired”, leading him to lower his earnings expectations for the next two years.
Apple has been praised for being one of the lone major technology companies to break out how many of each of its major products it sells each quarter. When iPhones were the hot new thing, like in 2015, it was easy for the company to tell investors it shipped 46% more of the devices. Now, the smartphone market has matured and growth is harder to find. Global shipments fell 8% in the third quarter, compared with a year earlier, leaving the industry “effectively in a recession”, Strategy Analytics wrote in a research note.
Chief executive Tim Cook likened reporting unit sales of products to disclosing how many items are in a shopping cart at the grocery store versus how much the items cost.