When Apple's recent earnings call failed to live up to analyst's expectations last month, it sent the company's stock tumbling. Strange, in what appeared to be yet another blockbuster of a quarter. Aside from an element of market manipulation, which always appear to be a risk with Apple's shares, there is a reason for this: the iPhone.
The line goes that Apple's income is so heavily reliant on the iPhone (nearly two-thirds of revenue) that any sign that the flagship device is failing sets investors panicking.
Ignoring for a moment that the analysts themselves make the predictions and then kick Apple for failing to meet them, how accurate a perception is this?
Currently the iPhone holds a small, but incredibly valuable part of the smartphone market. Globally that amounts to somewhere between a fifth and a third of overall smartphone sales, depending on which quarter we are in.
Focusing on the premium market, Apple's share is somewhere more like 60-80%.
The iPhone is an aspirational device, whilst there are many smartphone buyers who can afford to choose an iPhone and don't, there are a far greater proportion who can't, but would if they could. As a result we see Apple making sales to large numbers of defectors from other platforms. I'm willing to bet that a lot of those are driven by a change in circumstance meaning the buyer can now afford the phone they desire.
Given a choice smartphone buyers migrate to the iPhone at far greater rates than they move away. Add in the effect of repeat sales thanks to Apple's customer loyalty and almost total retention of customers and you'll see why concerns about iPhone sales are nonsense.
iPhone sales growth will continue for the foreseeable future. Investors worrying about whether the rate of growth matches random numbers picked by analysts are really getting their underwear in a twist for no good reason.