Not anxious about Apple stock; company should build in U.S.

TimCook1

Apple Inc AAPL.O shares plunged 10 percent on Thursday after the iPhone maker blamed weak China demand for a holiday-quarter revenue shortfall, with many investors anxious the rare stumble was a harbinger for slowing global growth.

Meanwhile, UBS analysts appear more confident that Apple's growing services business, which includes app store and iCloud storage, could help the company make up for slower iPhone sales.

Economic deceleration in China had caught Apple off guard and trade tensions between Washington and Beijing were starting to hurt consumer spending on smartphones in China, Apple Chief Executive Officer Tim Cook said on Wednesday. China is also one of Apple's most important markets, once referred to as a "hypermarket" by Cook.

While President Trump's trade war with China isn't helping Apple and other United States technology companies, Mr Ives believes Apple miscalculated by continuing to roll out high-priced phones in China, creating an opening for rivals with less costly alternatives that still worked well.

Despite all that, Apple continues to face fierce competitive pressure from Android smartphone makers trying to move into the premium portion of that market - and I don't see that abating in 2019. It's the first time since 2002 that Apple issued a reduction in its quarterly revenue forecast. Sales in China, which The Wall Street Journal says account for nearly 20 percent of global sales, have dropped amid President Donald Trump's trade war with Beijing. Chipmakers and suppliers of phone parts also fell.

At least 15 Wall Street analysts lowered their price targets on Apple's stock before markets opened today, with one slashing its price target by $75 to $200 per share. In a letter to investors, Apple CEO Tim Cook said the company had not anticipated the magnitude of the slowdown in the region.

Jerry Zigmont, owner of MacWorks, a New Haven, Conn. -based Apple consultancy, told CRN on Thursday that he hopes the troubles in Apple's business will be a "wake-up call for them". "Until it changes this pricing strategy, it is unlikely to see market share growth and will most likely see a gradual contraction as iPhone users upgrade at slower rates", said Richardson. "China is the biggest beneficiary of Apple, more than us".

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He also cited other factors that contributed to the drop in iPhone revenues such as consumers adapting to a world with fewer carrier subsidies, price hikes resulting from a stronger US dollar, and lower price for iPhone battery replacements. The news comes as USA earnings season looms around the corner. But the Shanghai Composite index jumped 1.8 percent and South Korea's Kospi, which has a high number of tech stocks, added 0.4 percent to 2,001.80 after Thursday's lower close.

And Apple has "failed to acknowledge the possibility that current iPhone prices are simply too high", he wrote.

"Apple makes their product in China", Trump said.

Apple's stock has slumped 39 per cent since early October.

Apple's market share in the third-quarter of 2018 was around 9 percent, and has dipped from above 14 percent in 2015, overtaken by local rivals like Huawei, Oppo and Vivo.

The yield on the 2-year Treasury note slid to 2.39 percent from 2.50 percent, and the yield on the 10-year note sank to 2.56 percent from 2.66 percent.

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