Apple Collides With Reality

By Douglas A. McIntyre Published Nov 7, 9:30AM EST

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Apple Collides With Reality — © Dronandy / iStock Editorial via Getty Images

Based on its most recent quarterly numbers, Apple Inc. (NASDAQ: AAPL | AAPL Price Prediction) is in extremely good shape. Revenue was up 8% to $90.1 billion. Earnings rose 4% to $1.29 per share. iPhone sales were a bit lighter than Wall Street forecasts, but Mac sales were unusually strong. This holiday season, Apple needs to show that demand for its new iPhone 14 is robust. News that suppliers need to cut shipments of some iPhones will hammer that goal.
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iPhone sales face two problems, and it is unclear which is bigger. COVID-19 in China will undermine shipments. Apple management commented, “we now expect lower iPhone 14 Pro and iPhone 14 Pro Max shipments than we previously anticipated and customers will experience longer wait times to receive their new products.”
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Shipments may not be the major problem. Demand for the iPhone 14 has been soft, according to Bloomberg. Apple cut production based on the anticipation that this demand would be 3 million units less than expected. This represents a drop from 90 million units to 87 million. The fall-off will dent Apple’s next quarterly reported revenue.

Apple has largely dodged the 2022 decline in the stock prices of mega-tech companies. Its share price is off 25%, compared to a 34% drop in the Nasdaq and a 46% plunge in the shares of Amazon.
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Apple’s stock market success has been based on only one factor. A slowing economy has not hurt product demand. Investors have hoped this would continue to be the case if there is a recession.
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Apple has a chance to dodge a sharp stock price drop, but the window is closing. Production in China would need to pick up soon. Demand for the iPhone 14 would need to jump as well. As things are now, it is unlikely that both will happen simultaneously. Apple has a revenue problem it cannot dodge.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.