The iPhone Gusher

Josh Quittner / May 4, 2017

Since its blessed birth in a Palo Alto manger 41 years ago, Apple has confounded the pundits.  The press coverage of Tuesday’s earning’s call was a case in point: virtually every publication of note, from the Wall Street Journal (“the first prolonged slump in iPhone sales”) to Recode (“modestly disappointing”) seized on the notion that the quarter had been a major miss for the world’s most-valued company.

The modestly disappointed financial press might not have recognized itself earlier in the week, when it was modestly exuberant. In the days leading up to Tuesday’s earnings call, the narrative mainly centered on whether Apple, valued at the beginning of the week at $745 billion, would finally become the world’s first company with a trillion-dollar market cap. Mused FORTUNE“Since the presidential election, the iPhone maker’s shares have staged one of the most breathtaking displays in the history of capital markets… Given the fundamentals, how long should it take to reach the thirteen-digit milestone?” Not to be outdone, Forbes went one step further and predicted:  “Since Apple has a mere $255 billion to go, it will beat Amazon to the crown by a year, getting there by 2019.”  (Consistent with its contrarian reputation, Forbes did however urge investors to hedge their bets and “buy Amazon.”)

So now that the ash has settled and Apple’s stock price is rebounding (by Thursday afternoon, it was up, but still $1.50 off its high Monday, night before the Tuesday earnings call), what’s the bottom line?

I think it’s pretty clear to all but the haters that Apple is more than fundamentally sound—it’s headed into the post-trillion-dollar stratosphere. The two blemishes on its recent P&L—weaker than expected iPhone sales and poorer than anticipated performance in China (see CNBC’s excellent report on the China Effect here)—will be amply healed as we head into the rest of the year. Why?

Beyond its healthy desktop and laptop business, and never mind its “wearables” business, which by itself might put Apple among the Fortune 500 (pithy MacObserver article here), the defining objet miraculeux of the 21st century (thus far) is the iPhone. And by all accounts, the upcoming 10th Anniversary edition of the iPhone ought to be a runaway train.

PULL QUOTE: The iPhone 8 is expected to be Apple’s biggest update to the device ever. — MASHABLE

In fact, there’s plenty of evidence to suggest that iPhone sales were sluggish last quarter mainly because just about everyone knows the new one will be so cool.  (Even my dogs are talking about it). It wouldn’t be surprising to learn that only people who bought one last quarter did so under some kind of duress—loss, theft, toilet drops.

Of course, the trillion-dollar question will be whether anything can live up to the hype that will be piled on in the coming months. My advice is to stay calm. That’s all part of the boom-bust cycle of rumors that have followed the world’s most valuable company from the start.