Monday, May 27, 2024

Apple misses by a mile: Wipes out $43B

Apple shares are down 7% after they released disappointing March quarter results.

Apple (AAPL) missed by a mile.

Fanning concerns the world has finally reached a saturation point with smartphones, Apple late Tuesday stunned investors by missing revenue and profit forecasts for the March quarter. It was even worse than widely expected - and expectations were already low.

The company reported adjusted quarterly earnings of $1.90 a share, which is well below the $2 a share expected by analysts. It's not just a matter of just missing forecasts. Profit fell 18% from the same period a year ago. Revenue also missed expectations, falling about 12% to $50.6 billion, the biggest drop in revenue since the third-quarter of 2001, according to data from S&P Global Market Intelligence.

Shares of Apple are getting hit roughly 8% in after-hours trading, tumbling to $96.67. They closed in regular trading at $104.35, or down 0.7%, putting them down 0.9% for the year. The downward move in after-hours trading means the company shed $43 billion in market value based on after-hours trading.

The collapse in Apple's profits and the stock is the latest and biggest problem for increasingly nervous tech investors. Just last week both Google parent Alphabet (GOOGL) and Microsoft (MSFT) missed revenue and earnings forecasts for the first quarter. Trouble in Apple is also a problem for investors at large, since the company is the most valuable stock in the Standard & Poor's 500 giving it a huge effect on the value of the market. Prior to the after-hours selloff, Apple was valued at $579 billion - outstripping any other company in the S&P 500.

Apple is facing the same challenge that's plagued other companies that have become so dominate. The company's sheer size and influence create a practically impossible barrier to growth - as matching its past success and growth is increasingly difficult. Exxon Mobil (XOM), Cisco Systems (CSCO) and Microsoft are all examples of companies that recently become the most valuable in the U.S. that have struggled to maintain growth.

There is at least one bright spot to Apple's sheer size: Cash - and lots of its. Apple ended the March quarter with cash and investments of $232 billion, up 7.4% from the end of 2015. The company also said it was boosting the quarterly dividend 10% to 57 cents a share.

The question is - what will Apple do with its boatload of cash - other than just increasing the dividend ... again.

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