Published: Sun, January 06, 2019
Markets | By Otis Pena

Here’s what Apple’s China nightmare scenario looks like

Here’s what Apple’s China nightmare scenario looks like

The stock has a market capitalization of $828.15 billion, a price-to-earnings ratio of 14.20, a PEG ratio of 1.21 and a beta of 1.21.

The beginning of 2019 isn't proving to be as fruitful as Apple anticipated. Boston Standard Wealth Management LLC acquired a new position in Apple during the third quarter worth $204,000.

"While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, USA dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements".

Now the ongoing trade war between the USA and China may be having even more of an impact. He pointed in part to "rising trade tensions" with the United States.

"People are anxious that if a big name such as Apple has to report a decline in earnings, who else can be protected from something like that?", he said.

The overall smartphone market didn't fare well in 2018. Growth in 2018 is set to be the weakest since 1990.

"It's going to bring home the point to most investors that this trade war is an issue, it's out there, it's getting worse and that you can't just be hopeful that we're going to have a resolution at the end of February", said Michael O'Rourke, JonesTrading's chief market strategist. First, as my colleague Evan Niu wrote about the smartphone market in December: "What little growth ... is left is being driven by low-priced handsets from Chinese vendors".

Shares of the iPhone maker cratered almost 8 percent in extended trading Wednesday - knocking some $50 billion off the market cap after the company took the unusual step of cutting its revenue guidance.

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But Apple stores contacted in Beijing, Shanghai and Fuzhou in early December said they were still selling those older models - confirming a company statement that all remain available.

It is a company that is always tight-lipped about its finances between its quarterly results, so Wednesday's letter from Tim Cook warning Apple investors that the outlook had suddenly darkened was a bombshell which rocked the market.

The reason for that shortfall?

Apple has shaken the business world by lowering its sales and revenue forecast for the next quarter. Morgan Stanley restated a "buy" rating and issued a $245.00 target price (up previously from $232.00) on shares of Apple in a research note on Wednesday, September 5th.

Even the devices Apple already makes in India - the iPhone SE and iPhone 6S - are out of reach for most people. Our products enjoy a strong following among customers, with a very high level of engagement and satisfaction.

Technology companies in particular, which rely heavily on sales to China, have been slumping in recent months out of fears of a slowdown there.

"Assembly in India is important for Apple as it seeks to grow revenues in the Indian market", analysts at research firm Fitch Solutions wrote in a note this week. If anything, things could get tougher for Apple. 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.

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