Apple shares drop after news of waning iPhone sales

Apple shares drop after news of waning iPhone sales

Halo Investing's Jason Barsema and BigEyedWish's Ian Wishingrad on Apple cutting its sales forecast due to a downturn in iPhone sales in China and the outlook for Amazon.

"When we discussed our Q1 guidance with you about 60 days ago, we knew the first quarter would be impacted by both macroeconomic and Apple-specific factors".

CEO Tim Cook blamed the slump on a slowing economy in China, where Apple has also faced competition from Huawei and Xiaomi.

While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be. LVMH and Hermes shares also fell.

"This is not a catastrophe nor is it a sign that Apple is losing its grip on the smartphone market but merely a misjudgment by Apple with regard to how much money people will pay for an iPhone".

In a note to investors, Apple CEO, Tim Cook, revealed that the company was revising its estimates for end-of-year income.

The company (AAPL) announced on Wednesday that investors should expect lower revenues than those projected for the last quarter because sales in China were below those anticipated.

But most of those new Samsung smartphones, as well as those from Apple and other OEMs, will likely cost more than what many are willing to pay.

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According to Business Insider, $450 billion has been wiped from Apple's value since the company hit its peak on October 3.

The revenue cut for the just-ended quarter raises questions about whether Apple, the face of American business in many parts of the world, is being punished by Chinese officials or consumers in favor of local rivals such as Huawei Technology Cos Ltd, whose pricey smart phones compete with the iPhone. Some analysts point the finger at Apple itself, and its pursuit of constantly increasing iPhone prices.

Apple's top-of-the-line iPhones like iPhone XS Max, which were released in fall 2018, sold for more than 1,000 dollars, far more expensive than most China-made mobile phones on the Chinese market. "Therefore, Apple's rare profits warning is a red flag for market watchers", noted Neil Wilson, chief market analyst at Markets.com. And after several component makers in November forecast weaker-than-expected sales, some market watchers called the peak for iPhones in several key markets. But Cook specifically said then that he "would not put China in that category" of countries with troubled growth.

What was the main cause of this sales miss?

Apple isn't the only company that could be hurt by China's slowing economy.

However, the company's woes in China have been exacerbated by a court decision that could potentially ban iPhone sales in the country.

In his letter, Cook said Apple has $130 billion in net cash and that it intends to continue its efforts to reduce that cash balance to net zero, which the company has so far accomplished through dividend increases and share buybacks.

That doesn't mean, however, that the trade war won't play an increasing role in their declining sales in China.

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