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Why Apple Stock Plunged 18.4% in November

By Steve Symington - Dec 11, 2018 at 6:02PM

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The Cupertino-based tech giant pulled back hard last month. Here's what investors need to know.

What happened

Shares of Apple ( AAPL 2.19% ) declined 18.4% in November, according to data from S&P Global Market Intelligence, after the tech juggernaut announced strong fiscal fourth-quarter 2018 results but followed with underwhelming forward guidance. 

To be sure, Apple shares fell almost 7% on Nov. 2 alone -- the first trading day after its earnings release hit the wires. In it, the company revealed quarterly revenue had climbed 20% year over year to a staggering $62.9 billion, translating to 41% growth in earnings per share to $2.91.

Woman in rain jacket using Apple's iPhone XR

IMAGE SOURCE: APPLE.

So what

With the exception of Apple's iPad line, where sales declined 15% to $4.1 billion, its top-line growth was broad-based. Revenue from Apple's core iPhone segment jumped 29% to $37.2 billion, despite iPhone unit sales remaining roughly flat at 46.9 million devices -- a happy consequence of consumers' shift toward higher-priced smartphones. Apple's higher-margin services segment also saw revenue climb 17% to $10 billion, its flagship Mac business deliver 3% growth to $7.4 billion, and revenue from all other products -- namely including Apple TV, Apple Watch, Beats, iPod, and HomePod products -- soar31% to $4.2 billion. 

As such, Apple managed to generate jaw-dropping operating cash flow of $19.5 billion this quarter, while simultaneously returning more than $23 billion to shareholders via dividends and repurchases.

Now what

So why the decline? For one, Apple provided guidance for revenue in the current first quarter of fiscal 2019 to be between $89 billion and $93 billion, representing a significant deceleration in year-over-year growth to between roughly 1% and 5%.

It also likely didn't help that, during the subsequent conference call, Apple management told investors the company will no longer provide unit-sales data for its iPhone, iPad, and Mac segments going forward. The move effectively stirred concerns over whether Apple is attempting to mask unfavorable unit-sales trends for those three key product lines.

Still, investors shouldn't forget we're talking about a massively profitable business that's set to enjoy the positive supplemental influence of its burgeoning services and "other products" segments. After coupling those catalysts with Apple's ambitious capital returns initiatives, I think the pullback has offered long-term investors an attractive buying opportunity today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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