Apple’s IPhone Dependency Has Become a Curse

Apple (AAPL) has been one of the most profitable stocks and the company’s iPhone series has been reason behind this success over the years. High dependency on iPhone has been a blessing for Apple investors over the years, as sales of the flagship smartphone has grown every year since its inception. However, it seems like iPhones sales have peaked just after the launch of iPhone 6 and iPhone 6 plus. The company’s iPhone sales reached 231.5 million (highest till date) in 2015, but decreased considerably for the first time in previous quarter.
The decrease in sales has resulted in a steep decline in Apple’s stock, a trend which is likely to continue in the upcoming quarter.

As opposed to Apple, its foremost rival Samsung is performing very well in the market. Samsung recently launched its new flagship phones Galaxy S7 and Galaxy S7 Edge that eventually became the best smartphones all over the world. Apple is on its way to launch its new iPhone 7 anytime in the month of September, but it is not likely that Apple has any plan to change its iPhone design.

On the other hand, Tavis McCourt, an analyst from Raymond James, reviewed his estimate regarding revenue and earnings for the new Apple quarter to further shortcoming. McCourt now anticipates revenue of $45.04 billion for the company’s fourth fiscal quarter, compared to market estimate of $46.14 billion. Not only has McCourt declined its revenue estimates, but also declined its earnings estimates to $1.41 per share equated to $1.56 per share.

Apart from this, another thing that investors always think of in the case of Apple is its enormous cash heap of around $233 billion, but they are not aware of the real situation. However, it is true that the company had more than $233 billion in cash at the end of first quarter 2016, but if you eliminate the company’s short-term & long-term debt of $80 billion, this number moves down to $153 billion.

Moving forward, if we remove the difference among the accounts payable and accounts receivable, totalling to around $28.5 billion, the above figure further moves down to approximately $124.5 billion. The final calculated figure is just slightly greater than that in third quarter of 2013 as well its existing shareholder equity is just 6 percent greater compared to its third quarter level of $123.5 billion.


All in all, Apple doesn’t look like a good investment, at least for the next few months. The company will have to launch a really upgraded phone to compel users to upgrade their iPhones this time around. Thus, I would advise investors to avoid Apple at least till the specifications of the iPhone 7 are confirmed.
Published on Jul 15, 2016
By Prudent Investor

Copyrighted 2016. Content published with author's permission.

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