What Happened With Apple Stock in 2018, and What's Next


Photograph by Dhe Haivan

For Apple shareholders, 2018 was the best of times, and then the worst of times.

With just a handful of days left in the year, we thought we'd take a look at all 30 stocks in the Dow Jones Industrial Average, starting with the worst performer- Goldman Sachs Group (ticker: GS)-and working our way up to the highest-flying stock in the benchmark, Merck (MRK). The rankings may shift over the next few days, but the stories behind the stocks shouldn't.

Not long ago, Apple (AAPL) was the toast of the market, as investors anticipated a strong launch for this year's fall iPhone lineup.

In August, the smartphone maker became the first publicly traded U.S. company to reach $1 trillion in market value. Through early October, its shares were up nearly 40% on the year.

And then it all fell apart.

On Nov. 1, Apple reported fourth-quarter earnings per share of $2.91 on revenue of $62.9 billion. That exceeded consensus estimates for EPS of $2.78, and revenue of $61.46 billion, according to FactSet. But the company's guidance for sales for the December quarter, critical because of holiday sales, fell short of Wall Street expectations. Apple forecasted fiscal first-quarter sales of $89 billion to $93 billion, versus the average analyst projection of $93.02 billion.

Then, as it discussed the results for the September quarter on its conference call, Apple threw in a surprise: The company said it would no longer offer unit sales data for its products, starting with the current quarter.

The news spurred some analysts to wonder if the lack of transparency presaged weaker iPhone sales. Apple stock declined 6.6% the day after the earnings report.

And it kept falling. Heading into Christmas Day, Apple had dropped nearly 30% since the end of October, as concerns mounted about weak demand for the newest iPhone models, amid guidance warnings from several component suppliers.

Last month, The Wall Street Journal, citing people familiar with the matter, also reported that Apple cut orders for all three newly released iPhone models.

But now the stock has fallen low enough to a valuation that looks attractive. A couple of weeks ago, Barron's put Apple stock on its Top 10 Stock Picks for 2019 list.

(As the market rallied on Dec. 26, Apple shares jumped 7% for their best one-day gain since 2014.)

Apple shares now trade for 12 times projected fiscal-2019 EPS of $13.24, compared with 14 times for the S&P 500. The company also had $123 billion in net cash at the end of September and has a current dividend yield of 1.9%, according to FactSet.

On Dec. 13, Piper Jaffray analyst Michael Olson agreed that weaker demand for the latest iPhones is now priced into Apple's stock.

"Regarding Apple shares, we believe international iPhone weakness and disappointment around lack of future unit disclosure are both largely baked into the stock," he wrote then.

He maintained an Overweight rating, but cut his price target to $222 from $250.

Perhaps Apple can find new avenues of growth that will help boost its share price next year.

Earlier this month, Barron's suggested that Apple may want to offer an all-in-one hardware and software subscription offering to stabilize annual revenue and appease investor concern over the cyclical nature of iPhone product launches.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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