Apple shares fall as iPhone makers’ sales fall again

Consumer electronics giant Apple (AAPL) beat Wall Street’s estimates for earnings in its fiscal third quarter, while matching views for sales. But its outlook for the current quarter was weak, sending Apple shares into a dive on Friday.

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The Cupertino, Calif.-based company said late Thursday that it earned $1.26 a share on sales of $81.8 billion for the quarter ended July 1. Analysts polled by FactSet had expected Apple earnings of $1.20 per share on sales of $81.8 billion. On a year-over-year basis, Apple’s earnings rose 5%, while sales fell 1%.

Apple’s results marked its third consecutive quarter of declining sales. However, earnings returned to growth after two consecutive quarters of flat or declining profits.

“Our business performance in the June quarter year-on-year improved compared to the March quarter,” CFO Luca Maestri said in a news release. “During the quarter, we generated very strong operating cash flow of $26 billion, returned over $24 billion to our shareholders and continued to invest in our long-term growth plans.”

Apple shares retreat on report

Apple expects revenue growth in the September quarter to be similar to what was seen in the June quarter, or down 1.4% year over year. This is despite a minor currency headwind.

In midday trading on the stock market today, Apple shares fell 2.9% to 185.61. In the regular session Thursday, Apple shares fell 0.7% to close at 191.17.

“The overall tone from Apple management on the call remains guarded given macro uncertainty,” Barclays analyst Tim Long said in a note to clients.

Apple’s outlook for the September quarter missed Wall Street expectations and signals four consecutive quarters of revenue declines, “which hasn’t happened in the last two decades,” Long said.

Long reiterated his equal or neutral rating on Apple shares.

Apple stock needs new catalyst

Rosenblatt Securities analyst Barton Crockett downgraded Apple stock to neutral from buy. However, he kept his course target of 198.

Apple is now in a “slowdown phase,” he said in a note to clients. Apple needs a new hit product to drive the next phase of its growth, Crockett said.

Apple’s Vision Pro mixed-reality headset, due out in early 2024, looks “promising” but will be “a multi-year build with a meaningful risk of failure,” he said. “An Apple car may never appear. Otherwise, it’s hard to imagine an iPhone 15 meaningfully changing the growth curve at this point.”

Services Growth offsets decline in hardware sales

In the June quarter, Apple’s hardware sales fell 4.4% year over year to $60.58 billion, while its service revenue rose 8.2% to $21.21 billion.

Apple’s iPhone revenue fell 2% to $39.67 billion and accounted for 48% of the company’s total sales.

Meanwhile, sales of Apple’s Mac computers fell 7% to $6.84 billion. And sales of iPad tablets fell nearly 20% to $5.79 billion.

On a brighter note, revenue from Apple’s wearables, home and accessories unit rose 2% to $8.28 billion in the June quarter.

Apple stock is on the IBD Tech Leaders list.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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