Apple to Miss Sales Expectations, Dow takes a Hit

Apple to Miss Sales Expectations, Dow takes a Hit

Sadly, this all merely amounts to more bad news for the company, whose stock shed an additional 9 percent during Wednesday and early-Thursday trading upon the release of Cook's memo, and is now down to its lowest trading price since April 2017.

FORECAST CUT Apple on Wednesday lowered its forecast to $84 billion in revenue for its fiscal first quarter ended December 29, below analysts' estimate of $91.5 billion, according to IBES data from Refinitiv.

Apple shares fell 10 percent to $142.19, the biggest drop in nearly six years, in New York Thursday. Analysts had been expecting revenues of around $91bn, according to market analyst FactSet. Apple originally forecast revenue of between $89 billion and $93 billion. Cook blamed "economic deceleration" in emerging markets and decreased demand for iPhones as drivers for the unanticipated shortfall - particularly pointing to the slowdown of China's economy in the latter half of 2018.

Suppliers in Europe and Asia slumped on the news. In November, the company said it would stop reporting unit sales of iPhones, iPads and Macs beginning in fiscal 2019. "Blaming macro weakness and trade concerns is obfuscation".

This is why analyst Rod Hall says Apple looks a lot like the old Nokia, which also struggled to remain relevant in the mobile market once its own business reached saturation and customers delayed upgrades to new-generation models. Trade tensions between the two have dragged on for almost a year and uncertainty over their outcome has dragged down stock indexes around the world.

Still, the market seemed to be caught off guard.

The impact is already being felt globally.

Cook's letter rattled investors, with analysts calling it a "bombshell". "The iPhone is something that everyone knows and buys, and if people aren't buying it, then it's a pretty good sign they're having a hard time". "We grew 16 percent, which we're very happy with. iPhone in particular was very strong, very strong double-digit growth there". The company also sees the traffic to retail stores and partner sellers in China declining in the quarter.

Apple isn't the only company facing difficulties in a slowing Chinese economy and escalating trade tensions. With iPhone's production lines in China, Apple has been caught in between the world's two largest economies. There are likely many others, too, that will be forced to announce lower-than-expected earnings, according to the chairman of the White House Council of Economic Advisers.

Hal Eddins, chief economist at Apple shareholder Capital Investment Counsel, said Cook's comments on the impact of the U.S. trade tensions with China "might be a dig at (U.S. President Donald) Trump, but mostly he may be using the trade turmoil as an excuse for some missteps they've made over the previous year". Plus, he doesn't think the Apple decline is a push back to trade tensions. Apple is appealing the decision. On its website in China, Apple now advertises the iPhone XR for 4,399 yuan with the trade-in of an iPhone 7 Plus.

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