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Apple Stock Drops As iPhone Maker’s Sales Decline For Third Straight Quarter

Consumer electronics giant Apple (AAPL) beat Wall Street’s target for earnings in its fiscal third quarter while matching views for sales. But its outlook for the current quarter was weak, sending Apple stock plunging on Friday.


The Cupertino, Calif.-based company late Thursday said it earned $1.26 a share on sales of $81.8 billion for the quarter ended July 1. Analysts polled by FactSet had expected Apple earnings of $1.20 a share on sales of $81.8 billion. On a year-over-year basis, Apple earnings increased 5% while sales dropped 1%.

Apple’s results marked its third quarter in a row of declining sales. However, earnings returned to growth after two consecutive quarters of flat or declining profits.

“Our June-quarter year-over-year business performance improved from the March quarter,” Chief Financial Officer Luca Maestri said in a news release. “During the quarter, we generated very strong operating cash flow of $26 billion, returned over $24 billion to our shareholders, and continued to invest in our long-term growth plans.”

Apple Stock Retreats After Report

Apple expects revenue growth in the September quarter to be similar to what it saw in the June quarter, or a 1.4% decline year over year. That’s despite a smaller foreign-exchange headwind.

In midday trades on the stock market today, Apple stock sank 2.9% to 185.61. During the regular session Thursday, Apple stock dipped 0.7% to close at 191.17.

“The overall tone from Apple management on the call remains guarded given macro uncertainty,” Barclays analyst Tim Long said in a note to clients.

Apple’s September-quarter outlook missed Wall Street’s expectations and signals four consecutive quarters of revenue declines, “which hasn’t happened in the last two decades,” Long said.

Long reiterated his equal weight, or neutral, rating on Apple stock.

Apple Stock Needs New Catalyst

Rosenblatt Securities analyst Barton Crockett downgraded Apple stock to neutral from buy. However, he kept his price target at 198.

Apple is now in a “slowdown phase,” he said in a note to clients. Apple needs a new hit product to drive the next phase of its growth, Crockett said.

Apple’s Vision Pro mixed-reality headset, due out in early 2024, looks “promising” but will be “a multiyear build, with a meaningful risk of failure,” he said. “An Apple Car may never appear. Otherwise, it’s hard to imagine an iPhone 15 meaningfully changing the growth arc, at this juncture.”

Services Growth Offsets Hardware Sales Drop

In the June quarter, Apple’s hardware sales fell 4.4% year over year to $60.58 billion while its services revenue rose 8.2% to $21.21 billion.

Apple’s iPhone revenue declined 2% to $39.67 billion and accounted for 48% of the company’s total sales.

Meanwhile, Apple’s Mac computer sales fell 7% to $6.84 billion. And its iPad tablet sales slid nearly 20% to $5.79 billion.

On a bright note, revenue from Apple’s wearables, home and accessories unit rose 2% to $8.28 billion in the June quarter.

Apple stock is on the IBD Tech Leaders list.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.


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