Apple’s stock has fallen 38% from the all-time intraday high it hit on Oct. 3. But as painful as this decline has been for faithful investors, it’s not the worst one of the iPhone era.
Shares of Apple
were down as much as 10% on Thursday, after CEO Tim Cook said the company’s sales for the holiday quarter would total about $84 billion, way down from the company’s previous estimate of $89 billion to $93 billion.
In a letter to shareholders, Cook cited the rollout of new products, a strong U.S. dollar and the slowing economy in China as the main reasons for the lower-than expected sales. The new sales estimate of $84 billion for Apple’s fiscal first quarter would be a decline of 4.9% from $88.3 billion a year earlier. The company estimated its gross profit margin for the fiscal first quarter would be about 38%. A year earlier it was 38.4%.
At about 11.51 ET on Thursday, Apple’s shares were trading for $145.33, down 38% from their all-time intraday high of $233.47 on Oct. 3.
During the iPhone era, which began on June 29, 2007, when the first model of the iconic phone was released for sale, there have been many declines of 20% or more, according to split-adjusted data provided by FactSet. Rather than splitting hairs, to show “declines within declines,” here’s a broad look at declines of 20% or more since the first iPhone was sold. The table shows the date ranges of the declines from high to low:
|Intraday high||Intraday low||Price change|
So the current price decline from the Oct. 3 record high is the fourth-worst of the iPhone era.
An iPhone-era chart puts the price action into more perspective, showing what an amazing upward run the shares had after their post-credit-crisis low in January 2009:
A price-target cut, but also a ‘buy’ recommendation
If you consider the challenges in front of Apple, including the strengthening dollar, President Trump’s trade dispute with China, the partially related economic slowdown in China, longer upgrade cycles and some pushback against newer higher-end and higher-priced iPhones, it might help to take the long view. Economies ebb and flow, the dollar doesn’t always rise and trade disputes tend to be settled. Apple can also work on its product mix and marketing to recapture its buzz.
In a note to clients on Thursday, Wedbush analyst Daniel Ives called Apple’s cutting of sales estimates late Wednesday “a bombshell negative preannouncement that will be a defining moment for Cook & Co. for years to come.” He cut his price target for the shares to $200 from $275. But even the lower target would represent a 62% increase for the shares, based on their intraday price on Thursday.
Ives maintained his “outperform” rating for the shares and said their “floor” would range from $130 to $140.
“[W]e believe going forward this is an installed base story of 750 million active iPhones worldwide with 350 million of those in the current window of an upgrade opportunity over the next 12 to 18 months,” Ives wrote. He then estimated “a sum-of-the-parts valuation, assuming the services business valuation is roughly $400 billion on a standalone basis with $130 billion of net cash,” would support a valuation between $200 and $210 over the next year.
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