Above Avalon:

Apple’s 2Q16 earnings report was not pretty. Not only did iPhone sales decline year-over-year for the first time, but management issued alarming guidance for 3Q16, suggesting another very difficult quarter for iPhone sales. In addition, Apple expects iPhone average selling price (ASP) and margin to deteriorate due to the recently introduced $400 iPhone SE.

On top of it all, Apple will take a historically large $2 billion inventory adjustment related to the iPhone 6s due to sales coming in below expectations. While some are optimistic that the iPhone 7 and 7 Plus will turn things around in a few months, it’s time to become skeptical. The iPhone growth story is breaking apart, and management does not seem to be in control of the situation.

There is a lot of justifiable doom and gloom surrounding Apple in general and the iPhone in particular so far this year. A lot of it is incomprehensible to those of us who use and enjoy the products the company makes. Personally, I don’t think there’s any need to push a panic button but the company does have some serious challenges ahead for the rest of the year and into 2017.