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Should You Avoid Apple Shares (NASDAQ: AAPL) As iPhone Sales Tank?

iPhone X

For a long time Apple Stock (AAPL) has been widely been considered an automatic BUY for most people when they discuss the tech giant. Apple over the years has innovated so much in the marketplace, so why not? Apple has had strong sales and major popularity with a range of devices including iPods, iPads, and of course iPhones over the past 10+ years.  

On Monday, November 12th, Apple shares dipped by 5% eroding $40 billion or so off its market value following news by supplier Lumentum that it’s largest customer had reduced orders, this customer is widely believed to be Apple.

Many Apple iPhone suppliers, such as Lumentum have tempered expectations on their earnings, mainly due to lower orders from Apple, this has many people wondering why. Lumentem supplies 3D sensing components used in FaceID for some iPhone models. The following day, Qorvo also scaled back their forecasts for Apple orders. Qorvo supplies radio-frequency chips for iPhones. Qorvo reduced its projected revenue for the December quarter by 8%. Between the Qorvo and Lumentem news, Apple’s share price hasn’t responded well.

Have people began looking to other phones? Are people tired of the high prices Apple are charging? As we enter peak shopping season, many people are asking these very questions. There are certainly some reasons for concern. Apple has had flat annual sales of the iPhone since the iPhone 6 and 6 Plus launches.

Apple is known for their great innovation on their hardware products, such as iPhones, but should Apple now look more to services?  Many believe this would be a good idea so that Apple isn’t so dependent on iPhone sales. Apple currently has 59% of revenue coming from the iPhone, while services account for just 15%.

So what does this mean for Apple’s share price?  Perhaps the best course of action might be to wait for next quarter’s earnings to see what impact the drop in iPhone sales has on revenue and earnings. Due to Apple’s reliance on the iPhone the shares can be punished heavily once fears of declining iPhone sales gather steam, under similar circumstances back in 2013 the shares declined 40% over a period of 6 months as investors feared the iPhone had passed its peak. Apple eventually eased those fears once the iPhone returned to growth. If we’re looking at a similar scenario this time around further falls could be on the way with the shares currently only 17% off their peak.

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