Apple Stumbles... Because The iPhone Now Looks 'Small And Old'

Apple shocked Wall Street yesterday by delivering a quarter that only marginally beat the “guidance” it had given three months earlier.

Normally, Apple blows away its guidance.

This time, however, the company’s revenue and earnings were only modestly higher than Apple’s guidance, and fell short of many analyst projections.

The main culprit?

iPhone sales, which have declined over the past couple of quarters. With Apple’s current iPhone, the 4S, now looking small and old relative to the latest phones from Samsung and other manufacturers, Apple’s customers appear to be waiting for the iPhone 5, which is expected to be released this fall. This air pocket will likely affect the current quarter as well.

This was also the first quarter in many years in which Apple’s profit margin declined year over year. One of the big drivers of Apple’s stock explosion over the past few years has been its ever-expanding profit margin. And, for many reasons, including increased competition and price pressure, that era of steady margin expansion may be coming to an end.

The good news for Apple’s shareholders is that iPad sales were very strong, the stock’s valuation is reasonable, and we’re now only one quarter away from the expected launch of the iPhone 5. Those factors, combined with speculation that Apple will release a new, smaller iPad and a full-fledged TV, will likely keep excitement about Apple’s stock high, at least through the end of the year.

SEE ALSO: Well, It Looks Like One Of Apple’s Big Risks Is Finally Hitting Home

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