Despite Breaking Earnings Records, Apple Stock Slumps – WTH?!

Apple has just released their financial results for Q1 of the 2014 fiscal year (so, the last quarter of 2013), and while they did set some records, not everyone is particularly pleased.

Apple took in $57.6 billion in revenue last quarter, which is a new record and easily tops Q1 2013’s intake of $54.5 billion, although profit in both quarters was the same, at $13.1 billion. Of course, setting a new revenue record should be put in perspective – in the eyes of the market, companies like Apple should almost always be pulling in record revenues. Anything else would suggest that the company is in decline. Of course, that might or might not be true, but you know how the market loves to overreact.

Speaking of overreactions, Apple’s stock is down 8% today, a response to the financial results above. The record revenues were overshadowed by iPhone sales, which, ironically enough, were also at record highs, with 51 million sold. But, investors were expecting something more like 55 to 57 million, which Apple fell well short of. Record sales were expected because Apple has had recent success breaking into the Chinese market directly, but those gains were offset by declines in North America.

It’s questionable as to how much long-term success Apple will have in China, though. Apple is showing signs of slowing down because lower-priced competitors like Samsung are finally gaining in not just technological prowess, but flat-out mainstream marketing appeal. Apple has gone a long way riding the popularity of its brand name to make up for higher asking prices, but it’s looking like that might not be sustainable. Without serious budget offerings (of which the still too expensive iPhone 5C is not one), Samsung and others will probably keep chipping away at Apple’s sales over time.

This naturally leads to calls for new product categories from Apple, which is traditionally how Apple has won big – the iPod, iPhone, and iPad virtually launched their respective device categories, and led to huge windfalls for Apple. That said, the rumor mill is currently only talking about an iWatch and iTV – both of which are in categories where Samsung and others have already landed and had success. Whatever Apple does, it’s pretty clear that they’ll be fine financially for years and years to come. They could very well keep riding the MacBook, iPhone, and iPad for a while and do just fine. But, if they want to remain the growing 21st century tech titan they have been, Apple’s going to need to cook something new up at some point.


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