Apple Rebounds as Investors Look Past Sluggish Holiday Quarter
Comment of the Day

February 03 2023

Commentary by Eoin Treacy

Apple Rebounds as Investors Look Past Sluggish Holiday Quarter

This article from Bloomberg may be of interest. Here is a section: 

Revenue fell 5.5% to $117.2 billion in the December quarter, Apple’s biggest sales period of the year, coming in well short of the average Wall Street estimate of $121.1 billion. It was Apple’s first quarterly decline since 2019 and the first time the company has missed analysts’ holiday sales projections since 2015. 

The iPhone and Mac were particular weak spots for Apple last quarter, dragged down by a broader slump afflicting mobile devices and computers. The Covid restrictions in China added to Apple’s woes, making it harder to ship enough of the most popular versions of the iPhone. Timing was another issue: The company didn’t launch new Macs and HomePods until recent weeks, missing the end of the holiday quarter.

Eoin Treacy's view

Apple predictably reported lower sales for the fourth quarter. It is a highly cyclical business because most people only buy new phones every few years. The 1000 charge cycling of lithium-ion batteries translates into a 3-year sales cycle for phones. 

The surge of cash donated to consumers during the pandemic boosted initial iPhone purchases and coincided with the peak of the existing renewal cycle in 2021. That carried over into sales in 2022 but that momentum will be more difficult to sustain in coming quarters as monetary conditions tighten around the world.

That negative outlook was priced in over the last four months as Apple declined back to test the region of the 1000-dat MA. Investors are now pricing in the potential that future sales will return to the outsized growth. I remain sceptical that will be the case but a clear downward dynamic will be required to check momentum beyond a pause to unwind the short-term overbought condition.

Click HERE to subscribe to Fuller Treacy Money Back to top