23rd October 2015
A new report by CMC Markets chief market strategist Colin Cieszynski suggests that Apple’s dominance of the smart phone market may be starting to erode. In the following analysis, Cieszynski asks whether Apple could go the way of other market leaders as its share underperform relative to recent years.
The chart above (with Apple in the mixed red and green) of major smartphone market players shows that, over the last six months, Apple shares have been increasingly underperforming relative to Google (Alphabet) and Microsoft, although Blackberry remains the weakest in the group having missed badly on sales ($491M vs $605) in its last quarterly results announced three weeks ago. The shares have started to rebound on speculation that the upcoming launch of the Blackberry PRIV – a phone that combines Blackberry’s security software with Google’s Android operating systems and enables users to access Google Play apps – could help turn around its fortunes.
Recent announcements from Google teaming up with LG on new Nexus phones and Microsoft’s recent launch of the Windows 10 for computers and mobile devices indicate that competitors keep attempting to eat Apple’s lunch.
Meanwhile, Apple recently launched its iPhone 6 products. Opening weekend results are to be split over the next two quarters, with sales up to the Saturday night included in the current report and from the Sunday onward to be in the next report. This raises the risk of disappointment depending on which days saw stronger sales.
Apple stock downtrend?
Apple’s stock has increasingly been showing signs of weakness. After a big rally through 2014, a huge head and shoulders top has been forming over the last year, and the shares have been steadily dropping toward a retest of the neckline near $105, where a breakdown would complete the pattern. A death cross of the 50-day moving average falling below the 200-day average suggests that the previous uptrend has ended and a new downtrend emerging.
How each company performs relative to expectations may have a significant impact on its shares. Even more than usual, companies that have disappointed on earnings or guidance have been severely punished by the marketplace. The Wal-Mart profit warning plunge below shows that even the big heavyweights have not been immune to punishment from the market for faltering – in that case, losing billions in market cap in a matter of minutes.
The Netflix chart below shows what could happen the following day to companies who disappoint after the close. These selloffs also indicates that many traders appear to have entered this earnings season looking for reasons to head for the hills rather than to jump on the bandwagon.
In the case of Apple, the weekend sales timing issue could be discounted over time. Traders could focus on sales growth in China looking for signs of whether the summer stock market turmoil had any impact on consumer spending. USD, meanwhile is still much higher than it was a year ago, which could impact the USD value of Apple’s overseas sales.