Apple Warns of Quarterly Revenue Shortfall

Saturday, 05 Jan, 2019

The beginning of 2019 isn't proving to be as fruitful as Apple anticipated.

Apple AAPL, under severe pressure after cutting its fiscal first-quarter revenue guidance, could eventually bottom out at $120 per share or about 16 percent lower than Thursday's open, CNBC's Jim Cramer predicted.

Apple posted sales of $88.3 billion in the fiscal first quarter a year earlier, so the new forecast would mean Apple is reporting a holiday quarter slowdown for the first time since Cook became CEO in 2011. US stocks have tumbled over the last three months as investors anxious that the economy might slow down dramatically because of a variety of challenges including the trade dispute and rising interest rates. "There are a heck of a lot of USA companies that have sales in China that are going to be watching their earnings being downgraded next year until we get a deal with China".

"That is having an impact on earnings and it's not going to be just Apple", White House Chairman of the Council of Economic Advisers Kevin Hassett said in an interview with CNN.

Beyond pricing, some consumers in China have fled to competitors like Huawei's phones for their combination of unique back covers and camera systems, and upstarts like OnePlus because of its speed.

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. The second largest economy is slowing, and could be a convenient excuse for companies missing forecasts, but two veteran global investors say Apple's problems are largely self-inflicted, not a harbinger of a looming catastrophe in emerging markets. But Cook specifically said he "would not put China in that category" of countries with troubled growth. China is also one of Apple's most important markets, once referred to as a "hypermarket" by Cook.

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

A timeline illustrating Apple share prices in 2018. The current median price target is $186. Even before then, local rivals like Huawei had been gaining market share over Apple.

Too many new products.

Apple attributes disappointing sales to the slowdown of China's economy. To counteract this, we've already seen OEMs like Samsung plan to throw a whole bunch of new, high-end smartphone models at the market and see which ones stick.

While China's economy is undoubtedly a big challenge for Apple, possibly more challenging in the long run will be users' attitudes toward smartphone upgrades.

Apple's stock fell 9.96 percent after CEO Tim Cook said told investors Wednesday the company lowered its revenue guidance to $84 billion from the $89 billion to $93 billion it had previously projected.

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