APPLE: FUNDAMENTAL ANALYSIS+PRICE ACTION & NEXT TARGET|LONG🔔

All of the headlines are true. The iPhone is indeed losing market share - in some ways.

While some of this loss can be attributed to unpredictable failures caused by the pandemic, some cannot. After all, COVID-19 has made life equally difficult for all smartphone manufacturers. But some of them still found a way to poach potential buyers of other brands.

Perhaps most notably, the market share of low-cost phones increased significantly last quarter, implying that numerous customers are no longer willing to buy devices with a four-figure price tag. We're even seeing indirect indications that this shift is happening in North America, Apple's most important market.

The thing is, it doesn't matter when you examine the rest of the data.

The data provider is IDC, a technology market research company that publishes the estimated number of smartphones released by each major manufacturer in any given quarter.

According to IDC, Apple sold 44.2 million iPhones in the three months ending in June, a 17.8 percent increase over last year's coronavirus-covered second quarter. That's not bad, even if the numbers come with a pandemic disclaimer. This growth is certainly ahead of Samsung's 9.3% year-over-year increase in shipments, even though Samsung shipped a much larger number of devices -- 59 million.

However, it is curious. Lesser-known smartphones such as OPPO and Vivo increased their shipments by 37% and 33.7% (respectively) last quarter, while Xiaomi increased its shipments by 86.6% year-over-year, ranking second with 53.1 million devices.

An isolated incident? Maybe, maybe not.

Apple's 14.1% share last quarter is better than its 13.5% share in the second quarter of last year and much better than its 10.2% share in the second quarter of 2019. Indeed, the average market share of 16.3% over the past four quarters is higher than Apple's typical 14% share, driven by an especially triumphant fourth quarter that saw the company's smartphone market share rise to 23%. However, the company was unable to hold on to much of the success caused by pandemic circumstances, such as an incredible 23.3% in the fourth quarter and 16% in the first.

It would also be shortsighted to ignore the fact that much of the iPhone's recent success in the market is a reflection of Huawei's absence and Samsung's failure to connect with customers, as well as Apple's marketing power. These two names are usually the main threats to Apple in the high-end phone market, but now they are virtually powerless.

And even so, Apple doesn't manage to knock them out of business. According to GlobalStats, after peaking at 28.8 percent in April 2020, the number of actively used iPhones worldwide has dropped to 26.9 percent. At the end of 2018, 56.8 percent of smartphone owners in North America were using iPhones, but after another decline in the first half of this year, they now account for 53.6 percent of actively used smartphones. Clearly, consumers are finding other smartphone options rather than gravitating toward the most recognizable name in the business.

However, Apple shareholders should not panic just yet.

This dynamic underscores the danger of a one-sided view of anything: there's always more.

Part of the story is that while Apple is losing market share, that doesn't mean it's selling fewer smartphones. The company is simply getting a smaller share of the current overall market growth after holding on to a significant portion of its share when the market itself began to shrink in 2018. Apple still sold an average of 57.8 million iPhones in each of the past four quarters, registering its highest year-over-year sales rate since 2015, when the iPhone 6 redefined what a smart mobile device could be. The overall smartphone market is still much smaller than it was at the peak of 2017.

And lest you think that the last four quarters are strong just because sales fell in the first two quarters of 2020, that's not true. Despite the effects of the pandemic, Apple managed to sell more smartphones in the first and second quarters of 2020 than in the first two quarters of 2019.

Another reason that shrinking market share is not an existential threat for Apple is that the company does an incredible job of extracting revenue from iPhone owners once they get into the iOS ecosystem.

Sensor Tower's data put things in perspective. The app market research company estimates that in 2020, the average U.S. iPhone owner will spend $138 on apps and other digital content from their device. That figure marks five consecutive years of spending growth from 2015 when the annual average was just $33. That's even more impressive given that, according to Sensor Tower, Apple's App Store generated about twice as much revenue worldwide in 2020 as Alphabet's Google Play, even though there are almost three times as many users of Alphabet's Android operating system as iOS users.

And more divergence is expected on that front. The iPhone 12 Pro may start at $1,000 apiece and go up quickly, but the new iPhone SE draws new consumers to iOS, starting at a more affordable price of $400 apiece.

Should Apple investors be watching the iPhone market share trend? Sure. It may not suggest much right now, but things are changing. There will come a time when an alternative to the iPhone will enthrall enough consumers to start reducing not only Apple's smartphone share but also its overall revenue.

If you're looking for a reason not to buy stock in the world's largest and most profitable company right now, narrowing smartphone market share is not.