Apple Inc Stock: Quality Concerns, Tepid Sales. Turbulence Ahead?

Apple Inc (NASDAQ:AAPL) stock is under pressure. Watch out for price action in Apple stock today.

Apple Inc Stock Quality Concerns, Tepid Sales. Turbulent Times Ahead

After a long wait, the day has come when you can finally purchase the latest Apple Inc. (NASDAQ:AAPL) products (excluding iPhone X), including iPhone 8, Apple 4K TV and the Apple Watch Series 3 with a cellular connection. In the previous years, Apple stores and other retailers selling the latest iPhone models used to witness people standing in long queues for hours to get their latest iPhones. Not this year. The initial reports suggest tepid sales of iPhone 8 in China, Austrailia, and other Asian countries. The pre-orders for iPhone 8 have also been lower than previous models. Also, mixed reviews for its latest products have been a cause for concern.

All in all, it has not been a good month for shareholders of the Cupertino based tech giant. Apple stock is down over 6% for the month and over five percent since the iPhone launch event a couple of weeks back. Apple stock is headed for one of the worst monthly performance in more than a year. While many had expected the stock to correct a bit given that it had rallied over 40% going into the launch event, mixed reviews for its latest products have been the main cause of concern. The next few weeks could be turbulent for Apple stock, though we remain confident of its long-term prospects. Apple stock is part of our top stocks to buy portfolio.
AAPL stock chart

Watch out for today's price action in Apple stock.

It looks like the stock has hit rough weather. Today's price action could shed some light on how Apple stock will behave in next few weeks. Apple technical charts show that the stock is testing a major support line. During yesterday's trade, Apple stock found support from the 100-day moving average line. The 100-day moving average has provided strong support to Apple stock price over the past one year. Apple stock had bounced back after testing the moving average line. In yesterday's trade too, the stock recovered after testing the moving average line. The stock is likely to test the moving average again today.

The stock has strong bearish momentum. A couple of days back, Apple stock had breached the 50-day moving average support line. The Moving Average Convergence Divergence also made a bearish crossover yesterday. In addition to this, the broader market concern around the North Korea threat and the evolving news around the sales of the latest Apple products will be the major drivers of the stock today. If the stock manages to breach the support line then it could head much lower over the next few weeks.

Apple stock technical chart for 22nd September 2017

Quality concerns could impact Apple Inc's pricing power.

In our previous post, we had discussed the concerns around pricing and shipment delays which were weighing heavily on the stock. Well, there are new issues which are joining the lists. And these are more serious than the earlier mentioned ones. The products launched by the company are getting mixed reviews, especially the cellular version of Apple Watch Series 3. The latest Apple Watch was supposed to be the next big thing. With the cellular connection, it was supposed to reduce the dependence on iPhone and give you the ability to make a call from anywhere without carrying your phone around. Well, the reviews of the watch are in, and to put it mildly, they are not that great.

Many tech reviewers, including Wall Street Journal and The Verge, reported multiple issues with the cellular version of Apple Watch, including connectivity issues and battery problems. The cellular connection dropped, calls were often choppy and even Siri sometimes failed to connect. Apple acknowledged the existence of this problem with the following statement,  "We have discovered that when Apple Watch Series 3 joins unauthenticated Wi-Fi networks without connectivity, it may at times prevent the watch from using cellular. We are investigating a fix for a future software release."  The battery life is another problem. If you keep your cellular connection on, the battery lasts for just half a day. And the Watch can sustain just an hour of talk time on LTE connection before you are forced to plug in the battery charger. Also, only a handful of apps work when your iPhone is not around.

Apple has built a brand image about the quality of its products. The 'high quality' image has given the company a very high bargaining power, allowing it to charge a much higher price than its competitors. But the latest quality issues are a cause for concern. This could impact Apple's image as a very quality conscious company, which could impact its bargaining power and do a lasting damage. Already, many are questing the pricing strategy of Apple. To be sure, this is not the first time that Apple products have some issues. But it has attracted very wide press coverage this year.

Betting heavily on iPhone X?

So, while the news has not been exactly great till now, analysts are pinning their hopes on iPhone X. Analysts are considering the tepid demand for iPhone 8 as a sign of a huge appetite for the iPhone X. Many consumers have indicated that they are willing to wait a few more weeks and spend a few hundred dollars extra for the tech giants most expensive iPhone which comes with face recognition feature and OLED screen in contrast to buying an iPhone 8 now which has little extra to offer over the previous models. If this turns out to be true, it could be a great news for the company. The $1000 price tag will boost both the top line and the bottom line. However, iPhone X is still facing shortages of several parts including OLED screens which could result in limited availability of the product in the initial few weeks after the launch. Which could be a bad news for the stock in the near term. In the long term though, we are confident of the company's prospects.

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Kumar Abhishek Kumar Abhishek   on Amigobulls :

Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice.

Buying and selling of securities carries the risk of monetary losses.Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions.

Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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