Headline and market makers alike have indicated that it has been a pretty tough 24 hours for Apple Inc. (NASDAQ:AAPL). After their Q1 results failed to live up to expectations, the markets judged the tech company’s shares rather harshly, as Apple stock plummeted by 8 percent in little more than 12 hours. Naturally, this hasn’t escaped the attention of the media, and it was in fact the negative sentiment attached to Apple’s sales during the first quarter of this year’s reporting period that partially instigated this stock price fall.
The performance of the consumer electronics giant was incredibly difficult to call, so much so that when polled 47 Apple experts and analysts, no one was correct in all of their assertions, or even particularly close.
Marathon Partners Equity Management, the equity long/short hedge fund founded in 1997, added 8.03% in the second quarter of 2021. Q2 2021 hedge fund letters, conferences and more According to a copy of the hedge fund's second-quarter investor update, which ValueWalk has been able to review, the firm returned 3.24% net in April, 0.12% in Read More
Apple’s iPhone sales disappoint
While iPhone sales were actually better than last year, they still failed to meet expectations. Apple Inc. (NASDAQ:AAPL) shifted 51 million iPhone 5 units during the quarter, which represented a 6.7 percent jump year-on-year. This might sound like good news for the corporation, but it was anticipated that they’d sell in the region of 54.5 million, with some murmurings even suggesting that the figure could be as high as 57 million.
Of course, for most companies selling over 50 million of any item in one quarter, particularly of a premium device such as the iPhone, would not only be excellent news it would be scarcely believable. However, Apple Inc. (NASDAQ:AAPL) has set the bar very high indeed and the company was forced to concede that sales hadn’t been quite as strong as they’d hoped. Apple CEO Tim Cook blamed changes in carrier policies for the drop in sales in North America, but this wasn’t enough to reassure the markets, which responded negatively to Apple Inc. (NASDAQ:AAPL)’s sub-par sales news.
Emerging markets offer solace
Elsewhere, Cook was keen to emphasize that Apple’s sales are growing in so-called emerging markets (as I’ve said previously, how you can describe China as an ‘emerging market’ when it’s the world’s second-largest economy, I’ve no idea…). It is clear that it is here where Apple Inc. (NASDAQ:AAPL) will need to show significant progress in future years, as the mobile phone and tablet manufacturer is already the top name in its traditional markets of North America and Europe. Meanwhile, Samsung is increasingly challenging Apple with its Galaxy range, particularly in East Asia, where the Korean manufacturer benefits from local sentiment.
Thus, Apple Inc. (NASDAQ:AAPL) growth of 76 percent year-on-year in Latin America, 65 percent in the Middle East and Africa region, 115 percent in Central and Eastern Europe, 20 percent in China and 40 percent in Japan, was presented by the corporation as being much more strongly indicative of their long-term prospects. Elswhere, Apple sold 26 million iPads, which was 13.5 percent more than for the same period last year.
This wasn’t enough to reassure the financial markets, though, and Apple Inc. (NASDAQ:AAPL) shares crashed in stock exchanges all over the world as the response to the below-par sales responses was felt in Apple’s market value.
It is worth bearing in mind, though, that the way the financial markets react to anything is extremely short-termist. They want to see spectacular growth, immediate potential for sales to go up and up and up inexorably, and they want to see this occur indefinitely. Trading no longer remotely operates on anything resembling the long-term value of a company; the overwhelming majority is short-term trading trying to turn an immediate profit. Indeed, the majority of trading on the stock exchange isn’t even conducted by human beings; instead, so-called high-frequency algorithmic supercomputers conduct billions of trades per day in order to achieve profits for institutions such as investment banks.
No company likes to see nearly 10 percent wiped off its value in a matter of hours. But the reality is that the city has unrealistic expectations nowadays of every company in any facet of industry that you care to name. You are never going to find a company that sells products and is habitually successful, and manages to perpetually grow every single quarter and every single calendar year, on a long-term basis. Such a concept is a practical impossibility.
Apple needs to diversify
What the figures do indicate is that Apple Inc. (NASDAQ:AAPL) needs to diversify, something that the company has recognized itself by signalling its intention to branch out into the likes of NFC-like technology, video game consoles and smartwatches. Without doubt, the core hierarchy at Apple will have its nose very close to the ground on any developments in the tech sector, and will be ready to move in whatever direction is necessary.
According to Forbes, Apple Inc. (NASDAQ:AAPL) is the world’s most valuable brand, and was winner of the Interbrand listing for the world’s top brand recently, displacing the seemingly invincible Coca-Cola. Meanwhile, Forbes ranks them as the second biggest in the world in profit, and the number one company in the world in terms of market value. Such momentum is not going to last forever, but the long-term prospects of the company remain excellent. The company is already forging a strategy to occupy the centrepiece of the living-room with Apple TV, as well as the markets in which they are already the principal player.
In short, despite the headlines and the drama…Apple Inc. (NASDAQ:AAPL) ain’t going anywhere.