Apple Stock Price Plunges After Earnings Warning

Ivan Schwartz
January 7, 2019

Nevertheless, the relatively poor earnings performance has depressed Apple's share price by about 8% recently, and may have had a knock-on effect on other tech stocks.

But the uptick didn't continue.

Apple CEO Tim Cook said in a letter to shareholders released after markets closed on Wednesday attributed that most of the revenue drop will stem from lower iPhone sales, China's slowing economy and trade tensions between China and the U.S. Blaming mostly macro headwinds, he failed to admit the launch of new iPhones haven't successfully lured consumers and acknowledge growing competition from domestic players.

While Cook said the main factor for the weakening iPhone demand is the trade war between the United States and China, many believe the high prices of the 2018 iPhones are actually what convinced many potential buyers to hold on to their purchases. President Donald Trump has also raised new tensions between the USA and China by imposing tariffs on more than $200 billion in goods, although so far the iPhone hasn't been affected directly.

In a letter to employees, published Wednesday, January 2, Apple CEO Tim Cook directly referenced the economic slowdown in Greater China as a cause for these lower revenue projections.

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Huawei store in Beijing, China on August 7, 2018. Trade tensions between Beijing and Washington have also intensified with tit-for-tat tariffs. "China has been very careful [about] not stirring up sentiments against competitors like Apple", Jain says.

News of Apple's concerns saw shares slide about 7.6% in after-hours trading. And market data has shown that the contraction in Greater China's smartphone market has been particularly sharp.

He noted that China's economy started to weaken in second-half 2018. Apple's top models, iPhone XS and iPhone XS Max, shipped in the fourth quarter of 2018 - placing the channel fill and early sales in that quarter, whereas previous year iPhone X shipped in the first quarter of 2018, placing the channel fill and early sales in the December quarter.

Analyst Patrick Moorhead of Moor Insights & Strategy told SiliconANGLE that Cook's warning to investors is not a surprise, since the company's suppliers have been warning of a slowdown for several months. Apple shares tumbled after Thursday's open. Between December 14 and 24, the Dow fell 350 points in six of seven sessions. Price rises in some countries have put off consumers, and iPhone owners have refused to upgrade, partly because of Apple cutting the price of replacement batteries that have extended the life of their older phones. The Christmas and New Year holiday period is traditionally an especially busy time for Apple as it follows the release of new iPhone models.

Krystal Hu covers technology and trade for Yahoo Finance.

Other reports by GizPress

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