Worried About Apple Stock Now That the Company's Lost the Smartphone Lead? Read This Before Making Any Big Moves

The headlines certainly seem alarming. Reports are coming out showing that iPhone sales fell 10% year over year in 2024's first quarter. The setback was so stark, in fact, that Apple (NASDAQ: AAPL) lost the top spot in the world's smartphone market share race that it held just a quarter earlier!

As is too often the case, though, such headlines fail to include a great deal of important context. Here's the rest of what you need to know about this week's news before deciding whether you need to dump your stake in Apple stock.

The iPhone loses its top spot ... again

The data comes from technology market research outfit IDC. In its most recent look at worldwide smartphone shipments, it reported that Apple delivered 50.1 million iPhones during the three months ending in March. That's 10 million fewer than the number Samsung (OTC: SSNL.F) delivered in the same quarter. That's also a marked difference from the final quarter of last year when 80.5 million iPhones were shipped versus Samsung's count of 53 million.

This market-share shift led Reuters to write a story with the headline "Apple loses top phonemaker spot to Samsung as iPhone shipments drop." Bloomberg's headline "Apple faces worst iPhone slump since Covid as rivals rise" is even more worrisome.

To be fair, both headlines are technically accurate. However, there are a couple of relevant details worth expounding on.

The first of these details is simply that this shift isn't abnormal. Apple is usually displaced as the global smartphone market leader between the fourth quarter and the following Q1. In fact, as the image below illustrates, in seven out of the past eight years Apple has lost its Q4 market share lead to Samsung during the following Q1.

Chart showing that Samsung's smartphone shipments outpacing iPhone shipments in Q1 is typical.

Data source: IDC. Chart by author.

Why? The iPhone is a popular gift during the holiday shopping season. Samsung smartphones aren't. Samsung-made smartphones are, however, historically better sellers over the course of a full year.

The other detail worth understanding is a semi-related one. That is, Apple started Q1 2024 at a disadvantage. People's response to the Q4 2023 release of the iPhone 15 was so strong that there weren't many interested buyers who didn't already own one by Q1.

Apple's iPhone deliveries (as measured by unit shipments) have been stagnant for years now.

Data source: IDC. Chart by author. Figures are in millions.

Also bear in mind that a handful of analysts -- including Morgan Stanley's -- suggest many iPhone fans may be holding out for the iPhone 16 that's likely to debut later this year.

That's just a guess, of course, but not an unreasonable one given that a lot of actively used iPhones are now several years old. Indeed, the iPhone 11 -- released in 2019 -- is still the world's most used iPhone, according to a recent report from Scientiamobile. Since these devices are now nearly five years old, their owners won't be able to wait much longer to make the upgrade.

Scientiamobile's data adds that the iPhone 12 and 13 are also now the second- and third-most used Apple smartphones. They're quickly approaching the end of their useful lives too.

Not a reason to dump your Apple stock

Don't read too much bullishness into these added details. Apple's still got some tough challenges ahead, to be sure.

Just look at the bigger picture as an example. Even though Q4 iPhone sales were strong, the longer-term trend is a stagnant one. The company's not really shipping any more iPhones now than it was several years ago. iPhone revenue itself has been similarly stagnant since late 2020 as well, with the average selling price of the iPhone arguably reaching its peak. Given that about half of Apple's top line comes from sales of the iPhone, there's cause for concern.

But the situation isn't quite as dire as this week's headlines would suggest. A subpar Apple is still a stronger company and a better investment prospect than plenty of other corporations on their best days. If nothing else, Apple is a cash-generating juggernaut. It can buy whatever growth it may no longer be able to create organically.

That's the long way of saying Apple's Q1 smartphone stumble isn't nearly as big a deal as it's being made out to be in some of these headlines. There may be better options out there, but you could certainly do a lot worse than sticking with this one for a while longer.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.

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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