Apple stock dives after iPhone sales' growth slows dramatically

Shares of Apple Inc. took a dive the morning after the tech giant reported disappointing quarterly results that showed its revenue growth slowing dramatically and iPhone sales hitting a wall. 

Apple stock tumbled as much as 5.4% to $94.61 on Wednesday morning.

After markets closed Tuesday, the Cupertino, Calif., company said its first-quarter revenue grew only 2% from the same period a year earlier, its slowest pace of growth since 2013.

Apple warned that its current quarter could be the roughest of the year. Analysts raised the possibility that the iPhone and iPad maker could post its first revenue decline in more than a decade.

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It’s possible that the share price will recover soon. Longtime Apple watchers know that the company has reported slower sales in years that follow blockbuster years, which is not necessarily a symptom of deeper troubles, said Tavis McCourt, managing director at Raymond James.

“They are going to face a challenging year because the previous year was so strong,” he said of Apple. “I’m a little surprised the stock is underperforming today, given how well publicized the iPhone weakness has been the last few months.”

McCourt said it was difficult to predict how much further Apple shares could fall, as stocks overall remain volatile.

A lack of innovation in Apple's latest products, industry experts said, has failed to excite consumers. That's translated into soft sales for its latest iPhone model -- demand for the iPhone 6S almost disappeared after the smartphone went on sale in September in the U.S., according to research firm Argus Insights. Many retailers offered discounts to push inventory, while Apple cut orders to suppliers. 

Chief Executive Tim Cook said in a Tuesday call with analysts that he predicts iPhone sales will drop in the current quarter, a problem that Apple barely avoided in the first quarter of 2016 (sales of the devices, which make up two-thirds of the company's revenue, grew only 0.4%).

Apple is expected to face slower growth unless it can create an entirely new product category, the way it did with the iPhone and iPad, or figure out a way to make its devices more affordable in emerging markets such as Latin America, Africa and Southeast Asia.

Strong demand in China for products such as the Apple Watch and Apple TV helped shore up its first quarter, but that demand could dim if the country's stock market tumult and economic uncertainty continues.

Apple needs China to continue fostering a middle class hungry for the latest tech gadgets, analysts said. The company plans to have 40 stores open in the country by the year's end.

Follow Shan Li on Twitter @ByShanLi


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9:58 a.m.: This article was updated to add comments from analyst Tavis McCourt. 

This article was originally published at 9:26 a.m.