Despite crushing earnings expectations for the third quarter of fiscal 2021, Apple (NASDAQ:AAPL) shares waned over the last week and a half. The dip in prices could provide an entry opportunity for long-term investors, but it also signals some obstacles that Apple hasn't overcome yet.
Currently, the two main issues that Apple faces involve concerns about privacy and the supply chain. Let's break down what that means for iPhone users and hopefuls as well as current and prospective shareholders.
Apple's latest earnings weren't enough to help AAPL stock gain momentum last week.
AAPL stock is down just over a full percentage point since Aug. 3 and closer to 1.8 percent since the company announced its third-quarter earnings on July 27. This isn't a game-changing shift, but it's a noteworthy dip in the share price—especially considering the company's profitable quarter.
Apple's earnings saw its revenue swell 36.44 percent YoY and beat the expectations by 11.02 percent. The diluted EPS doubled during the same period, which led to a 28.16 percent rally over the EPS expectations.
Investors expect monetary success from Apple. The latest earnings report doesn't quell sizable concerns from the public.
AAPL stock down due to privacy concerns.
On Aug. 5, Apple announced rather abruptly that it will be taking the issue of child sexual abuse more seriously. Specifically, Apple will institute new technology that scans photographs on iPhones in search of CSAM (child sexual abuse material).
Some people are celebrating the move, but others are seriously concerned about Apple's move toward scanning personal content directly on iPhones. It opens a lot of doors to what the company can do with data in the future and it could inhibit privacy that individuals feel they deserve. Frankly, the fact that Apple is going through iPhone users' personal photo galleries scares some individuals in a "Big Brother" sort of way.
Like most privacy concerns, it's about what this small step toward heightened security could lead to in the future—stronger observation from Apple that extends beyond CSAM.
Chip shortage woes continue and Apple prepares for gap in iPhone production
During Apple's prosperous earnings call, executives shared that one big obstacle Apple has yet to overcome is the global semiconductor chip shortage. By this point, most investors and consumers are well aware of the ripple effect the chip shortage has had on a wide range of sectors, including tech and automotive.
Despite the ongoing chip shortage, Apple has managed to keep iPhone production rates at a high level. However, that's bound to change as "supply constraints" (as CEO Tim Cook put it) put a strain on production. This means that growth in forthcoming fiscal quarters won't be as dramatic as the latest earnings report.
Should you invest in AAPL stock anyway?
For many investors, a dip is the ideal time to break into a position, especially when it takes place on a blue-chip stock that has history on its side. Such is the case with Apple, whose returns will likely outlast the latest issues surrounding AAPL stock. With that said, a downside investment could help compound returns over the long term for shareholders, even if it's just in the form of averaging down.