Five years ago, the financial media feared a "grim" future for Apple (AAPL)... The tech giant released a poor earnings report in January 2019. Then, the scary headlines began.
The iPhone 16 Could Be Better Than You Think
By Marc Chaikin, founder, Chaikin Analytics
Five years ago, the financial media feared a "grim" future for Apple (AAPL)...
The tech giant released a poor earnings report in January 2019. Then, the scary headlines began.
Here's what Business Insider said after Apple's earnings release at the time...
It got worse...
Apple's next report in the spring of that year gave the media even more ammo to fear the worst for the company. As the BBC put it succinctly in this headline from May 1, 2019...
News service Bloomberg tends to avoid sensationalism in its headlines. But even it couldn't resist spotlighting Apple's struggles ahead of the October 2019 earnings report...
These headlines were all scary at the time. And the media wasn't lying about Apple's numbers...
Sales of the company's iconic iPhone fell nearly 14% in 2019. That remains the biggest one-year drop in sales in the smartphone's history.
However, like the media often does, it went too far in its quest for "clicks"...
The coverage painted the sales decline as a looming disaster for Apple. But it wasn't.
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Apple's 2019 numbers only looked weak compared with 2018 – a huge year for the iPhone.
Sales had jumped 18% that year. They had hit a then-record high of about $165 billion.
After such a great year, it makes sense that iPhone sales would pull back a bit. The media feared the worst. But a sales decline doesn't always signal the end of the world.
In fact, Apple's iPhone sales in 2019 still topped the 2017 numbers.
Millions of people simply loved their existing iPhones from the 6, 7, and 8 series at the time. And the newest models – the XS and XR – didn't entice enough folks to pay for an upgrade.
But that's OK...
Apple's iPhone is as close to a necessity as you'll find in our tech-centric world. And it was only a matter of time before people would want a new model.
You see, tech products go through "cycles"...
For example, VCRs exploded in popularity in the 1980s. By the late 1990s, sales plunged as folks switched to DVD players. And then, DVD players went through their own sales boom.
Today, the same process continues to happen. But it's over a much shorter time frame as products go through different generations.
If the popularity of one model booms, a company's sales tend to stagnate for the next few years. That's because folks are still using the popular model and don't want to upgrade yet.
It's exactly what happened with the iPhone...
Sales fell another 3% in 2020. But then, they exploded almost 40% higher in 2021. Then, they jumped 7% more in 2022. You can see what I mean in the chart below...
In other words... Apple's future was nowhere near as "grim" as the media feared.
Sure, the company endured a short-term slump in 2019 and 2020. But then, folks bought a lot of iPhones again. Sales ripped higher. And over the long run, the trend is still up.
We can see that uptrend through the three-year average of iPhone sales. That's the orange line in the above chart.
Here's why this story about what happened in Apple's past is so important...
A similar setup is developing right now.
Sales of the iPhone surged in 2021. But they've stayed mostly flat over the past two years. And the media is getting worried again about the company's latest numbers...
In the second quarter of this year, iPhone sales dropped more than 10% year over year. That's the steepest quarterly decline since the end of 2020.
But to me, the recent stagnation signals an opportunity...
A ton of folks will soon want to upgrade their iPhones. That means we're about to enter the next "up" part of the iPhone's product cycle.
Many people still use an iPhone 12 today. That model came out in late 2020. And it made up 73% of iPhone sales in 2021 (about 10% more than the iPhone 11 the previous year).
The company last experienced a big sales jump three years ago. That's usually when folks decide to get the next model.
The timing is perfect, too...
Apple unveiled its new lineup of iPhone 16 models at its annual release event last week.
These smartphones will feature a ton of upgrades – including new artificial-intelligence ("AI") features. Enthusiasts also like the bigger screen size, improved battery life, and new camera controls.
The iPhone 16's launch is obviously great news for Apple.
Today, the company holds a "neutral" rating in the Power Gauge. As you can see in the chart below, it has held this rating for most of this year...
However, you can also see that Apple has recently had strong relative strength versus the S&P 500 Index. And based on the positive Chaikin Money Flow indicator, the so-called "smart money" on Wall Street has been buying the stock recently.
Again, the Power Gauge isn't "bullish" on Apple right now. But some important pieces are in place for a stronger rating.
Folks, I'll be keeping an eye on the stock. And I recommend you do the same.
Good investing,
Marc Chaikin
P.S. I've also got my eye on another opportunity underway in the markets...
In short, it has to do with potential massive gains for certain stocks in the wake of the looming Federal Reserve decision on interest rates. Sure, many investors are expecting big gains overall for stocks when the Fed cuts rates. But the market implications surrounding a cut aren't as simple as you might think.
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Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
-0.03%
7
20
3
S&P 500
+0.05%
152
285
59
Nasdaq
+0.05%
16
67
17
Small Caps
+0.8%
601
966
357
Bonds
-0.48%
Energy
+1.35%
1
13
8
— According to the Chaikin Power Bar, Large Cap stocks and Small Cap stocks are Bullish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Communication
+4.36%
Information Technology
+4.19%
Materials
+3.23%
Discretionary
+3.19%
Industrials
+3.06%
Energy
+3.05%
Utilities
+2.65%
Financial
+1.89%
Real Estate
+0.16%
Health Care
-0.07%
Staples
-0.18%
* * * *
Industry Focus
Oil & Gas Equipment Services
1
9
19
Over the past 6 months, the Oil & Gas Equipment Services subsector (XES) has underperformed the S&P 500 by -16.90%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #20 of 21 subsectors and has moved up 1 slot over the past week.
Indicative Stocks
RIG
Transocean Ltd.
CLB
Core Laboratories In
SLB
Schlumberger Limited
* * * *
Top Movers
Gainers
ENPH
+6.31%
HPE
+5.63%
MRNA
+4.08%
URI
+3.95%
SYF
+3.93%
Losers
ACN
-4.82%
EW
-3.07%
CI
-2.89%
CSGP
-2.79%
COR
-2.78%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
GIS
No earnings reporting today.
Earnings Surprises
No significant Earnings Surprises in the Russell 3000.
* * * *
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