Apple Earnings Met Expectations. Here’s Why the Stock is Sliding.

Apple earnings for the fourth quarter of 2019 are out and they beat expectations, but the stock is sliding. Here’s why.

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Introduction

Apple earnings met expectations, but the stock is sliding because investors are concerned about a number of issues. Among them: iPhone sales growth is slowing, the company’s Chinese business is under pressure, and there are concerns about the company’s ability to innovate in the future.

Apple’s Earnings

Apple Inc.’s stock AAPL, -0.57% sank 2% in premarket trading Wednesday, after the iPhone maker reported fiscal second-quarter profit and revenue that rose above expectations but provided a weak current-quarter outlook. Earnings for the quarter ended March 31 rose to $2.46 a share from $2.10 a share in the year-ago period, while total revenue grew to $58.02 billion from $52.9 billion. The FactSet consensus was for EPS of $2.36 and revenue of $57.39 billion. For the fiscal third quarter, Apple said it expects EPS of $2.75, which is below the FactSet consensus of $2.81, and revenue of $59 billion to 63 billion, which surrounds expectations of $61.55 billion

Why the Stock is Sliding

Apple earnings for the second fiscal quarter of 2019 were released after the market close on Tuesday, with the Cupertino-based tech giant posting $58.02 billion in revenue and $2.46 in EPS, beating analyst expectations for $57.37 billion and $2.36 in EPS.

Despite topping earnings estimates, Apple shares were down more than 2% in extended trading Tuesday as investors digested the results and guidance.

Here’s a closer look at three key takeaways from Apple’s latest earnings report:

1. iPhone revenue was lower than expected: iPhone revenue came in at $31 billion for the quarter, representing about 53% of total revenue. That figure was below Wall Street expectations for $32.41 billion, according to data from FactSet. Unit sales totaled 52.21 million iPhones during the quarter, compared to analysts’ expectations for 52.75 million units sold.

2. Services revenue hit a new record: Apple’s services business, which includes things like iCloud storage,apple music subscriptions and App Store commissions, continues to be a bright spot for the company. Services revenue hit a new all-time high of $11.45 billion during the quarter, up 18% year over year and representing about 20% of total revenue. Analysts were expecting services revenue of $11.33 billion, according to FactSet data.

3. Guidance for the next quarter was below expectations: For the third fiscal quarter of 2019, Apple is forecasting revenue between $52.5 billion and $54.5 billion — below consensus estimates for $53.4 billion, according to FactSet data

Conclusion

Apple earnings for the fourth quarter of 2018 met expectations, but the company’s guidance for the first quarter of 2019 fell below Wall Street targets. Here’s what five analysts say about the results.

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