Was Apple (NASDAQ:AAPL) stock's post-earnings sell-off an overreaction? Though some investors may have been concerned with the tech giant's year-over-year decline in iPhone revenue, there's a good explanation for this. In fact, there are even reasons to be optimistic about Apple's iPhone business.
In this segment from Fool Live's "The Wrap," host Jason Hall and technology specialists Daniel Sparks and Daniel Vena take a closer look at why investors shouldn't sweat the important segment's 21% year-over-year decline in revenue.
Recorded on Oct. 30, 2020.
Jason Hall: With so much volatility in the market, let's do a high-level look at a few big names that have been touched on already but continue to be a major focus throughout the day. Also, likely holdings for a lot of you watching. Apple, I haven't looked at it in the past few minutes, but earlier, it was down pretty sharply.
Danny Vena: Six percent.
Daniel Sparks: Six percent.
Jason Hall: So it's fallen more. It actually was down five percent most of the day. Daniel, what should investors make of this?
Daniel Sparks: Well, also just zooming out a bit, it is down from highs of $138. Now, it's at 108. When we zoom out a bit, just notable, pretty big pullback here. Of course, they had a huge run so the correction probably makes a little bit of sense. I just think that this one is really interesting. Apple's covered so well. I do feel the mark has been missed with the way people are reacting to this. When you take a look at what's going on here, the timing of the iPhone release was different this year. Typically, it's in the end of the quarter that just ended, but instead, it was a few weeks into the final quarter. That explains the decline in product revenue. Meanwhile, services revenue is chugging along super nicely and even some of the other product segments. Then when you look at the commentary in the earnings calls, it's pretty optimistic. I guess the iPhone 11 revenue growth was really strong going into the middle of September, and then basically, people are just waiting for the delayed iPhone 12, which is also reportedly supposed to lead to iPhone revenue growth in the current quarter. That's as rapid as I could get on that. I'll just say I think in this case, that maybe there is a little bit of a headline reaction that's not quite justified. What do you think, Danny?
Danny Vena: I think you're right. The fact that Apple would have released the iPhone last quarter if the situation had been normal, it's anything but. It's an apples-to-oranges comparison, if you'll excuse the pun.