Published: Fri, January 04, 2019
Markets | By Otis Pena

Dow Jones drops 660 points after Apple forecast adjustment

Dow Jones drops 660 points after Apple forecast adjustment

The Dow Jones Industrial Average tumbled more than 660 points as Apple stock dropped almost 10 percent - the biggest single day decline for the company since 2013 - just one day after it slashed its revenue forecast.

CEO Tim Cook told investors that come January 29, the phone-flinger won't hit the revenue figures it said it would reach, and would in fact see its first year-over-year decline since 2016. By expanding its footprint in the Greater China region, Apple is vulnerable to a slowing mainland economy and a prolonged trade dispute with the United States.

While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be. It's also harder to lock in users within the iOS system in China, where proprietary Apple services, including iMessages and iTunes, aren't as popular as in the U.S.

Apple has revealed its takings are expected to be much lower than predicted during the crucial run up to Christmas, as demand for iPhones wanes.

The company cited struggling iPhone sales in China when it cut its quarterly revenue forecast on Wednesday for the first time in nearly two decades.

Zino added that the high prices of the iPhone XS and XS Max - which start at $999 and top out at $1,449 - are hurting the phones in China, where consumers have cheaper options from companies like Huawei.

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

A timeline illustrating Apple share prices in 2018.

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"Beyond China, we don't see strong evidence of a consumer slowdown heading into 2019, but we just flag to investors that we believe Apple's replacement rates are likely much more sensitive to the macro now that the company is approaching maximum market penetration for the iPhone".

Apple's move was not entirely a surprise. And after several component makers in November forecast weaker-than-expected sales, some market watchers called the peak for iPhones in several key markets. But he said then that he "would not put China in that category" of countries with troubled growth. The stock has fallen about 30 percent since Cook said in November that the company may miss its holiday quarter sales estimate.

Apple's revised battery program began at the beginning of 2018 and lasted just one year.

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

Huawei recently announced that it shipped more than 200 million units a year ago.

But some investors were heartened by Apple's plans on using its cash pile.

However, the excuses Cook comes up with fails to mention any arrogance or stupidity on Apple's part.

"We would anticipate the company increasing share buybacks on the weakness to return capital to shareholders at discount prices", said Trip Miller, managing partner at Apple shareholder Gullane Capital Partners.

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