Apple (NASDAQ: AAPL) shares plunged to a 52-week low on Jan. 3, a day after the company dramatically lowered its revenue guidance due to sluggish iPhone demand, especially in China. The tech giant is now expecting to report $84 billion in sales for the recently-ended first quarter of its 2019 fiscal year, down from its previous forecast range of $89 billion to $93 billion.
The lagging iPhone sales are a result of a maturing market. People are holding onto their smartphones longer because the changes between models are subtle and often not worth the higher prices.
Analysts on Wall Street made their opinions about Apple's guidance update clear with a slew of price target cuts for Apple shares. But what does billionaire Warren Buffett think of the plunge in iPhone shipments and in Apple's stock? Considering that Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) lost about $4 billion on its large Apple stake on Thursday, you'd think he'd have a strong opinion.
Warren Buffett's take on the rise and fall of iPhone sales
While Buffett hasn't spoken out publicly on Apple's disappointing sales update this week, we can take a look back at his past statements on iPhone shipments and Apple's stock to determine what he might be thinking this week.
For example, when Buffett was interviewed on CNBC in May 2018, he seemed to shake his head at the stress the iPhone shipment reports caused investors. He said that obsessing over the exact number of iPhones sold in a three-month period isn't a reliable way to measure Apple's performance. People who focus on iPhone shipments are missing the point of the company, according to Buffett.
"Nobody buys a farm based on whether or not it's going to rain next year or not," Buffett said. "You buy it because you think it's a good investment over 10 to 20 years."
That interview came after there had been a deluge of negative reports on iPhone X demand leading up to Apple's May 2018 earnings report. Yet when Apple reported, it revealed that the iPhone X had been its top-selling iPhone model across the globe for the quarter.
Considering that this interview happened less than a year ago, it seems logical that Buffett would give the same advice this week: Don't focus all your attention on Apple's ever-changing iPhone shipments. He wants investors to be thinking of Apple's long-term potential with its "sticky" products and its other revenue streams like its cloud business and App Store sales.
Would Buffett buy or sell Apple stock right now?
If anything, past comments from Buffett point to him possibly buying even more shares of Apple this week. At Berkshire Hathaway's annual meeting last May, Buffett told shareholders that he was hoping Apple's share price would drop so he could scoop up more of the company. In fact, during his CNBC interview, Buffett joked that he wished Berkshire owned 100% of Apple.
Berkshire first invested in Apple in the first quarter of 2016, buying 9.8 million shares when the stock was trading in the low $100s. Buffett has steadily increased his position in Apple over the past few years. It's now Berkshire's largest position by far at about 250 million shares -- at least as of September 30. That stake is worth more than $37 billion even after the stock's recent plunge.
With that many shares, it's easy to see why Berkshire may have lost $4 billion on its Apple shares earlier this week -- at least on paper. In fact, Berkshire's own stock fell more than 5% on Jan. 3, the day following Apple's report and the day that Apple stock bottomed out.
Buffett has been vocal about his love for Apple in spite of his overall disinterest in tech stocks. He said that Apple is special to him because he understands Apple's products and he thinks they are sticky (i.e. current users will remain loyal to Apple). With that type of confidence in the company, it will be interesting to look at Berkshire's next filing to see whether Buffett added to his Apple investment, trimmed it back, or kept it the same.
At a time when everyone seems to be criticizing Apple, it's always good to remind yourself that a billionaire investor has said that he plans to own Apple's stock for the long haul.
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Natalie Walters has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool is long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.