Apple Inc. are facing their first quarter of decline in sales since 2002. Investors have been worried that the pace of expansion from the company in recent years would not be sustainable and that consumer demand would weaken. In many ways, it appears that time has come. One of Apple’s biggest markets; China’s economic growth is expected to slow to 6.5% for 2016 and 6.3% in 2017. On top of this, fewer buyers upgraded to the new iPhone 6 models, resulting in an estimated 7% drop in uptake. Revenue has also been hindered by the stronger dollar; where it is estimated sales would have risen by 8% if foreign exchange effects were discounted. Despite the weakness, Apple still has significant pull as a brand with an estimated 23% of Android users switching to Apple last year.
Investor Notes:
- Earnings are expected to fall to $2.00 per share, down from $2.33 in Q1 of 2015, representing a 14% drop year-on-year.
- Revenue for the quarter is expected to fall by over 10% from $58.01 billion in Q1 2015 to $52.01 billion for Q1 2016.
- Sales are projected to contract by an average of 6% for the upcoming quarters.
- Apple has underperformed its industry by 1.7% and the S&P 500 by 17.5%.
- Price action remains above both the 50 day but below 200 day moving average (MA) with price action crossing both the 200 day MA last week indicating momentum has turned negative particularly in the long-term.
