Apple Loop: Apple Issues iPhone Warning, Disappointing iPhone 14 Price Rise, MacBook Air Competition

 Apple is warning that iPhone sales will fall in the September quarter for the first time ever. The company is also raising prices for its flagship smartphones by $50 and cutting prices on entry-level models. The company’s stock took a hit from those announcements, with Apple shares falling more than 5 percent on Friday morning. But investors shouldn’t panic — Apple still has plenty of things going right for it. Here’s why investors shouldn’t panic over Apple’s iPhone warning and price increase.

What’s causing the iPhone to drop?

Apple is forecasting that iPhone sale will fall in the September quarter for the first time ever, with a drop of between $9 billion and $11 billion from the same quarter last year.

The forecast comes as the company is raising prices for its flagship smartphones by $50 and cutting prices on entry-level models. The iPhone has been a cash cow for Apple, accounting for almost two-thirds of the company’s revenue. But as demand has declined, Apple has struggled to increase its supply of new iPhones to match.

The company said it expects to ship fewer iPhones in the March quarter than analysts were forecasting, likely because of the battery shutdown issue that led it to delay some shipments in January.

iPhone price increases and falling sales don’t mean Apple is struggling

Apple’s EPS and revenue are expected to be up 12% and 5%, respectively. So, Apple is still growing and its shares are still above $150. In fact, Apple’s EPS is above the forecast of $8.77 and revenue is slightly above the $96.94 forecast. What’s more, Apple’s services segment is growing at an accelerated rate and could soon become the company’s biggest money maker.

Services like Apple Music, iCloud, and App Store are expected to hit $45 billion in revenue this year. That’s up from $30 billion in 2018 and positioned to become the company’s biggest source of revenue in the future.

Watch is actually doing well

The biggest surprise in Apple’s earnings report may be that the Apple Watch is doing better than expected. Apple CEO Tim Cook said sales of the wearable device were “very strong.” Apple doesn’t break out sales of individual products, so observers are left to guess at the Watch’s performance based on the company’s overall product sales.

That has led some to conclude that the Watch is a flop, with tech blogger Mark Gurman saying that it has “been a disaster for years.” But Apple has been investing in the device for years — watchOS 5 was released in September with new health-tracking features and a Siri app — and Cook has suggested that the company has high hopes for the Watch’s future.

Conclusion

Apple is still a juggernaut, with a smartphone that is still the gold standard in the industry. And while their prediction of a drop in iPhone sales is certainly not good news, it is important to remember the iPhone is still the largest revenue stream for the company.

This drop is not due to a lack of interest in the iPhone but rather a lack of supply, which Apple says will be fixed by the end of June. To put it another way, the sky is not falling. Apple is still one of the strongest companies in the world, and its stock will likely recover quickly.

Investors should expect a fall in the short-term as they always do when Apple releases its earnings. But beyond that, there is no reason to panic over Apple’s forecast.

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