A mere five months after becoming the first trillion dollar company in U.S. history, Apple has lost more than a third of its market capitalization.
Buoyed by strong sales, Apple’s stock reached unprecedented heights in September 2018. However, since reaching that peak, the tech giant has hit a major rough patch. Over the course of the fourth quarter of 2018, Apple’s stock fell by 30 percent.
The company’s situation has not improved in the New Year. After slashing its Q1 revenue projections on Jan. 2, Apple’s stock has fallen an additional 17 percent. On Jan. 3, the corporation’s stock plunged to $142.19, its lowest level since 2017.
Due to its recent losses, Apple has fallen from its position as being America’s most valuable company to third place behind Microsoft and Amazon. To put the company’s staggering losses in perspective, the $450 billion it has lost in market capitalization is greater than the value of social networking giant Facebook, twice the value of financial services multinational Wells Fargo and three times the value of fast food institution McDonald’s.
The Smartphone Bubble Has Popped
So, after years of incredibly strong performance, why is Apple struggling now? Its recent tailspin seems due to one inevitable problem; the smartphone bubble that has inflated the company’s revenues for over a decade has finally popped.
In a letter to investors regarding the revenue guidance revision, Apple CEO Tim Cook blamed the corporation’s recent financial problems on weaker than expected sales of the iPhone. Cook attributed the cooling off of the company’s flagship product to a slowing of the Chinese economy, recent trade problems between China and the United States and consumers choosing to buy battery replacements rather than upgrading their existing hardware.
While Apple’s Chinese shortfall has been more dramatic, its sales in the U.S. market have also softened, a situation analysts blame on market saturation, increase prices, and a lack of true technical innovation. Bigger screens and brighter colors just do not hold the same appeal they once did.
Apple has Suffered Devastating Losses Before and Rebounded Stronger than Ever
With Apple suffering devastating losses and rivals like South Korea’s Huawei surging, it would be easy to argue that the company’s time in the sun may be over. After all, as opposed to Samsung and its intriguing foldable phone and tablet, the Cupertino, California-based corporation does not seem to have a single new killer product waiting in the wings.
But with all that said, Apple has a storied history of rebounding from periods of turmoil stronger than ever.
For instance, although the latest iPhones have underperformed, their lack of success pales in comparison to megaflops like the Apple III, the Lisa and the notorious Apple Newton. And it should be noted that two of those failed product launches occurred under the watch of late Apple founder Steve Jobs. Ultimately, the company recovered from its late ’80s slump by releasing the hugely innovative and popular iMacs in the mid-‘90s.
Moreover, the stock dips the company has endured this month don’t hold a candle to the 50 percent loss in market value Apple suffered in 2000. Nearly 20 years ago, the company hit a similar rough patch due to the desktop computer bubble bursting, but it eventually recovered by pivoting to take advantage of the then unproven digital music market.
Given its recent moves to break into new areas like A&R services and streaming video content, and the imminent launch of nationwide 5G, there are good reasons to believe Apple will regain its status as a trillion dollar company sooner rather than later.