Apple stock price analysis: Earnings to highlight iPhone, iPad woes

Apple (NASDAQ: AAPL) stock price has come under intense pressure in the past few months as concerns about the company’s growth continues. The shares retreated to a low of $170 on Tuesday, which was over 13.8% below the highest point this year. It is hovering near the lowest level since May 5th.

Apple’s iPad and iPhone problems

Apple, the biggest company in the world, is facing a major challenge as its key revenue drivers slow. These concerns will be laid bare on Thursday when the company publishes its third-quarter financial results.

Apple’s key challenge is that hardware sales are slowing down sharply. The iPad, which has been a key revenue driver in the past decade is showing more signs of contracting as demand for the product eases.

iPads are also lasting longer, removing the need for regular upgrades. Most importantly, iPhones have become so powerful that many holders see no need for using the iPad. The most recent results showed that iPad’s revenue dropped by 20% YoY in the second quarter to $5.8 billion. 

The iPhone is also seeing more growth weakness. Its revenue dropped by 2% to $39.7 billion. Like the iPad, iPhones are lasting longer these days. And apart from the titanium part, the current iPhone 15 Pro is extremely similar to iPhone 13 Pro. As a result, many sellers in China are now offering more discounts as sales fall. 

Strong US dollar implications

Apple’s products are known for quality and are often aspirational to most customers internationally. The challenge is that the soaring US dollar has made them unaffordable to most customers.

For example, the Japanese yen was trading at 127 in January and 150 today. Therefore, an iPhone that was selling at ¥127,000 in January in Japan is now going for ¥150,000. The same is happening in other countries like those in Europe, Turkey, South Africa, and China.

Further, inflation and high-interest rates are making it difficult for people to keep spending. In the United States, inflation sits at over 3.6% while interest rates have surged to the highest level in decades. 

As a result, credit card interest rates have surged to over 20% while delinquencies have surged. Similarly, customers are now faced with mounting mortgage payments. All these factors will likely have an impact on Apple.

Analysts believe that Apple’s Q3 revenue rose to $89 billion while its earnings per share was $1.3. The company made $90 billion in the same quarter in 2022, meaning that its business is slowing.

What next for Apple stock price?

AAPL chart by TradingView

There’s no doubt that Apple is a good company that manufactures aspirational products. Also, the company’s valuation has dropped from over $3.1 trillion to the current $2.6 trillion. 

Still, the challenge for the AAPL stock price is that it is still quite overvalued. The company has a forward PE ratio of 28.13 and a forward EV to EBITDA of 20.80. These numbers are still huge for a company whose business is not growing. 

The daily chart shows that the AAPL share price has retreated in the past few months. Along the way, the stock has moved to the 38.2% Fibonacci Retracement level. It also remains below the 50-day and 100-day moving averages.

The shares are also forming a falling wedge pattern, which is a bullish sign. But this pattern has more room to form since the two lines are yet to move to the confluence level. Therefore, the stock will likely remain under pressure in the coming days, with the next support level to watch being the 50% retracement point at $160.