Published: Sat, January 05, 2019
Money | By Wilma Wheeler

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

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

The offer comes after Apple iPhone sales in China lost momentum in November, with shipments tanking 22.8% month-over-month and iPhone's market share dropping to 11.7%.

The sharp reaction puts Apple on track for its biggest one-day share price drop in five years and helped trigger a broader sell-off in USA shares as investors fretted about the state of the Chinese market and the broader outlook for the global economy.

After Apple's first revenue warning in almost 12 years, investors also dumped chipmakers and tech stocks and flocked to perceived safe havens like U.S. Treasuries and the Japanese yen. In a press release published while trading in its shares was halted, Apple said it expects revenue of about US$84 billion in the quarter ended December 29.

Like at other consumer goods companies, the festive season is typically Apple's strongest quarter, but revenues of $84 billion would mark an nearly five percent fall from the same period last year and represent the firm's first year-on-year quarterly decline since 2016. Secondly, Tim Cook thinks the weakening U.S. dollar is to blame for Apple's lowered profits, as well as the company's flagship device, the iPhone, experiences its worst sales run in recent memory due to competition from overseas.

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China", Cook said on Wednesday.

The stock has fallen about 30 per cent since Cook first said in a November earnings call that the company might experience lower sales over the Christmas period.

Apple is one of the most powerful tech companies on the planet. The deal required customers to trade in an iPhone 7 Plus, a high-end handset from two years earlier.

"The question for investors will be the extent to which Apple's aggressive pricing has exacerbated this situation and what this means for the company's longer-term pricing power within its iPhone franchise", said James Cordwell, an analyst at Atlantic Equities. However, Cook admitted to staff that Apple didn't set a new record for iPhone sales in Q1. The company reports its fiscal Q1 2019 results on January 29.

"Apple sales in China have not been doing well for a few quarters now, part of the reason is that their price points have gone too high - past the $1,000 mark", said Kiranjeet Kaur, an analyst at market research firm IDC. STMicroelectronics, which makes imaging sensors for the new iPhone, dropped 9.2 percent, Business Insider reported.

"As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed", Cook said.

Apple did not immediately respond to a request for comment on Thursday.

"I think there are a heck of a lot of U.S. companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded next year until we get a deal with China".

Like this: