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Apple
Inc.
shares stumbled Friday as investors fretted over the iPhone maker’s financial outlook for the important holiday quarter and the company’s decision to stop reporting device unit sales in future results.
The stock fell 6.6% to $207.48, its worst percentage decrease since January 2014 and a drop that nearly knocked Apple from its lofty trillion-dollar stock-market valuation. Technology stocks, particularly those with sky-high valuations, have slumped in recent weeks.
Apple’s selloff Friday removed about 100 points from the Dow Jones Industrial Average, contributing to the broader market’s decline. The stock remains up 23% year to date.
Based on Apple’s current reported share count, its valuation would have slide under a trillion dollars if its stock price fell below $207.04. Shares were below that level heading into the close, but a flurry of buying in the final minute lifted the stock higher by 4 p.m. ET.
The company’s valuation could still change when Apple updates its share count, expected when the company files its annual report with securities regulators in the coming days.
Apple’s quarterly results, released after the close of trading Thursday, showed the world’s most valuable public company turned in another period of record revenue and profit—its fourth-consecutive quarter doing so. Apple said it had double-digit growth in all of its geographic regions, and that it continued to rake in money from App Store sales and other services.
But investors seized on two points. Apple’s forecast of revenue between $89 billion and $93 billion for the holiday quarter didn’t portend explosive growth, with the low end of its range only slightly above the year-ago results. That sent Apple shares on a downward trajectory.
And then the company said it would stop reporting unit-sales figures for its three most recognizable brands, the iPhone, iPad and Mac, while giving more details on its services business. That news knocked the stock a few percentage points lower.
“It just shows the frustration that investors feel after the company out of left field pulled unit metrics,” Wedbush Securities analyst Daniel Ives said. “You’re seeing a lot of investors scratch their heads trying to evaluate if the fundamental story of Apple has changed.”
Apple finance chief Luca Maestri sought to buffer the news during the company’s call with analysts Thursday. He reiterated that the revenue projection still suggests the company will turn in, once again, record results. He and Chief Executive Tim Cook stressed that unit-sales figures aren’t relevant to the company’s financial reporting anymore.
Apple first reached a market value of $1 trillion in early August, propelled by the sustained success of the iPhone. WSJ’s Spencer Jakab takes a look at how Apple got there. Photo illustration: Heather Seidel/The Wall Street Journal (Originally published Aug. 2, 2018)
That was evident in the numbers Apple reported. While the company’s iPhone unit sales showed 0% growth, the device’s revenue surged 29%, thanks to the company’s strategy of raising prices on its most popular gadget. The iPhone X price is just shy of $1,000, while the recently announced iPhone XS Max costs $100 more.
Analysts at BTIG said Apple’s decision to stop reporting unit sales could lead to speculation. “Apple might not think it’s helpful to report unit data for its products, but we do. More data is better than less data. There is rarely an exception to this,” the analysts wrote.
Apple cited other reasons for its revenue forecast, including a challenging situation with currency valuations. Mr. Maestri also stressed that a year ago, Apple released its priciest phone during its fiscal first quarter. This time around, it did the opposite, releasing the more modestly priced iPhone XR during the current quarter.
Analysts at J.P. Morgan said Apple’s forecast suggests the company is being conservative in the face of currency headwinds and softer growth in emerging markets. In a research note, the analysts wrote that Apple’s decision to stop reporting unit sales is “irrelevant in evaluating Apple’s success on its strategy relative to smartphones,” and that the focus is on driving growth in the average selling price of the phone.
The projection and the announcement of a change in how Apple will communicate its results took the shine off what was otherwise a robust quarter. Revenue for the three months ended Sept. 29 rose nearly 20% to $62.9 billion from the same period a year earlier, while profit soared 32% to $14.13 billion. Both numbers beat Wall Street’s forecasts.
Write to Sarah E. Needleman at [email protected]
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