Apple plunges after slashing revenue guidance for its holiday quarter (AAPL)

Roman Schwartz
January 5, 2019

Apple stock plunged 8.54 per cent to US$144.44 by midday Thursday. I have talked to a few people, both at Apple service centers and at third-party authorized fix centers, who report that there had been a significant uptick in iPhones coming in for battery replacement over the final few months of the program, so maybe this did indeed have a bigger than anticipated effect on holiday sales. Moreover, we believe that the high-end smartphone market is fully mature with *structurally* elongating replacement cycles, which we maintain is the company's key long-term challenge. Apple makes its product in China.

While President Trump's trade war with China isn't helping Apple and other U.S. 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. But he said sales decreased as consumer "uncertainty" grew over the U.S.

But Apple's new $1,000 iPhones are a hard sell to Chinese consumers anxious about the economic future, as trade tension continues between China and the United States.

Cook told CNBC that trade tensions between the two economic heavyweights are putting "additional pressure on their economy". "That's what we're seeing now", said Jack Ablin, chief investment officer of Cresset Wealth Advisors.

Cook also said in the letter that fewer carrier subsidies, price increases based on the strength of the USA dollar and cheaper battery replacements caused the weak iPhone upgrades for the quarter.

According to a Reuters report, Apple reduced its forecast to $84 billion in revenue for the fiscal first quarter that ended on December 29.

Cook's comments echoed the concerns that have pushed investors to flee stocks over the past three months. More than US$4 trillion has been pruned from American equity values in the worst fourth-quarter rout since 2008. The Dow slid 2.8 percent to 22,868.22.

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On Thursday, Henry Zhu, a student from Shenzhen, was browsing a Xiaomi store at the upscale Parkview Green mall in Beijing as he considered the relative attractiveness of Apple's latest products. Manufacturing is still growing, but at a slower pace than it has recently.

Apple's top-of-the-line iPhones have a starting price of $1,000 (£800). Microsoft shed 3.7 percent to $97.40. Makers of phone parts also fell. The S&P 500 technology companies had their worst day since August 2011. The Nasdaq lost 202 points, or 3 percent, to 6,463.

By early 2018, General Motors was selling a third more cars in China than in the U.S. Starbucks unveiled plans to open a new coffee shop in China every 15 hours on average. They are also dealing with higher costs for metals as a result of tariffs. France's CAC 40 and Germany's DAX were the biggest losers, shedding around 0.7%. "The stock is now trading close to 10x our 2020 earnings expectation, a historic low in absolute and relative terms, and see limited further downside to the stock".

Oil prices edged higher.

Apple gave up 9.2 percent in early trading Thursday.

The yield on the 10-year Treasury fell to 2.64 percent. Both were large moves.

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