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Why Apple Stock Dropped Today

What happened

Shares of Apple (NASDAQ: AAPL) fell 5.6% on Friday after the tech behemoth's fourth-quarter results disappointed investors.

So what

Despite the challenges of operating its global supply chain during the coronavirus pandemic, as well as the closure of many of its retail stores, Apple was able to eke out a 1% gain in revenue. The $64.7 billion in sales it generated was slightly above Wall Street's expectations of $63.7 billion.

The small gain was driven in part by strong sales of iPads and Macs, which appear to have benefited from more people working and learning from home during the COVID-19 crisis. Solid growth in Apple's services and wearables businesses also contributed to its modest sales increase.

Investors decided to take profits in Apple's stock following its Q4 results. Image source: Getty Images.

iPhone sales, however, declined by 20.7% to $26.4 billion ahead of the launch of Apple's new 5G-enabled devices. Analysts had expected iPhone sales of $27.9 billion.

Now what

Despite the shortfall, investors have reason to be optimistic about the iPhone's future revenue- and profit-generating prospects. Apple's new model should benefit from the excitement surrounding the rollout of new 5G wireless networks and the blazingly fast wireless internet speeds they can deliver.

CEO Tim Cook said during a conference call with analysts that the initial data points for the iPhone 12 suggest that the product is "off to a great start." If Apple can sustain that momentum, its stock price could rebound sharply in the quarters ahead.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.


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