Apple stocks tumble after company cuts forecasts for key quarter
Apple stocks tumble after company cuts forecasts for key quarter
Apple lowers Q1 expectations, blaming shortfall on weak Chinese economy and trade war
06 January, 2019, 20:11
The company slashed its revenue guidance for the first fiscal quarter of this year, ended December 29, to $84 billion - sharply lower than analyst forecasts averaging $91 billion.
Even if those trade tensions ease, it is hard to see Chinese phone buyers turning back to Apple in large numbers now the spell has been broken.
Still, some local players managed to grow against the trend and they may be eating into Apple's market share.
Apple issued a rare revision to its earnings guidance earlier this week, cautioning investors that the company is anticipating to generate a few billion dollars less in revenue than initially expected.
Apple originally forecast a revenue of between $89 billion and $93 billion. Cook states that the "magnitude of the economic deceleration" in Greater China took Apple by surprise, resulting in much of its revenue decline.
Cook said the iPhone "accounts for all of our revenue shortfall", whereas other products in Apple's lineup such as the Mac and iPad are seeing strong growth.
Apple's first profit warning since 2002 has clearly generated a significant amount of finger-pointing at the Cupertino giant's headquarters, so much so that in the letter to investors Apple may have said more than it had planned on saying.
Offering trade-ins for Android phones is a rare move for Apple and suggests that the Silicon Valley giant is having a hard time in China not just getting existing iOS users to upgrade to the latest model, but also luring users from homegrown Android phones. The future contract for the broad S&P 500 index rose 1.4 per cent while the Dow future contract climbed 1.3 per cent.
The sharp reaction puts Apple on track for its biggest one-day share pricedrop in five years and helped trigger a broader sell-off in U.S. shares as investors fretted about the state of the Chinese market and the broader outlook for the global economy.
For the last two days in tech town nearly everyone has had their say about Apple and its share of "troubles" with the iPhone.
At this point, it's worth pointing out that if indeed the battery replacementprogram was a significant factor in the profits warning, Apple only has itself to blame because got itself into this mess in the by throttling iPhones in the first place. But he said then that he "would not put China in that category" of countries with troubled growth.
This piles on to existing anxiety of a slowdown in global growth, Apple can be used as a proxy to China's growth. "They're definitely having difficulties in China but we've seen this movie before and they tend to have hard quarters and recover and come back from that". It's also harder to lock in users within the iOS system in China, where proprietary Apple services, including iMessages and iTunes, aren't as popular as in the U.S.
"The question for investors will be the extent to which Apple's aggressive pricing has exacerbated this situation and what this means for the company's longer-term pricing power within its iPhone franchise", James Cordwell, an analyst at Atlantic Equities, toldReuters. During the same quarter in the prior year, the business posted $2.07 earnings per share.
Technology stocks are leading a sharp decline in early trading on Wall Street after Apple said iPhone sales were slowing down in China.
But some investors were heartened by Apple's plans on using its cash pile.
"While we continue to expect Apple to be focused on the Indian market, it will only find limited traction in the near term", Fitch Solutions said.
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