Will the iPhone Lose Its ‘Cash Cow’ Status Soon?




In the previous part, we discussed how Apple’s (AAPL) falling iPhone sales, especially in China, have taken a toll on its stock. Due to many reports about weak iPhone sales, with 30.1% losses, Apple stock underperformed many other tech stocks (SPY) including Qualcomm (QCOM), Alphabet (GOOG), Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Microsoft (MSFT). In the last quarter, Qualcomm, Google, Facebook, Amazon, Netflix, and Microsoft lost ~21.0%, 13.4%, 20.3%, 25.0%, 28.5%, and 11.2%, respectively.

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No more cash cow?

Reports about weak iPhone sales in China have increased since the beginning of the fourth quarter. However, the nightmare became true for investors when the company’s CEO Tim Cook confirmed sales troubles in China on January 2. He cut the guidance for the quarter ending December 29.

On CNBC, Bernstein analyst Toni Sacconaghi warned investors not to “rush into buying Apple.” She expects iPhone revenues to fall 14% YoY for the quarter.

According to Wall Street analysts’ consensus as of January 9, Apple’s first and second-quarter revenues for fiscal 2019 will likely fall 4.6% and 2.9% YoY, respectively.

After Apple’s co-founder and then CEO Steve Jobs launched the first iPhone in 2007, it became the company’s cash cow. Recent trends, as suggested in Cook’s letter to investors, show that Apple’s Services, Wearables, and Mac revenues are witnessing huge gains. In the letter, after talking about recent challenges, Cook said, “Most importantly, we are confident and excited about our pipeline of future products and services.”

For now, the iPhone will probably still be Apple’s cash cow. The iPhone’s status could experience a gradual change in the long term.

Next, we’ll discuss what Warren Buffett said about the iPhone last year and why he might be wrong.


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