Apple’s start to the new year has been pretty sour to say the least. After the company issued its first ever revenue shortfall warning in over 12 years amid a weakened China demand, it is now the company’s investors who are dumping stock.
Apple’s warning resulted in a rallied dumping of company stock, which has now resulted its share price to drop by over 10% in a single day. In fact, the company’s stock price is down by a total of 38 percent since its October peak. This, after the company halted trading yesterday afternoon to provide lower guidance for upcoming earnings. As for the company’s market capitalisation, the much reported $1 Trillion mark, which Apple achieved in October, is way down the charts. Company’s market cap is now below $700 Billion, thus wiping out $300 Billion — a figure that is more than the nominal GDP of close to 75% countries individually.
So what exactly has led to this ? The one prime reason is of course Apple’s first revenue warning in nearly 12 years. The company has blamed weak China demand for the same. Many analysts and economists however believe, that Apple was caught off-guard with respect to the Chinese market. While most reports have clearly highlighted the falling consumer growth in world’s second largest economy, Apple hadn’t really thought of the same. In fact, Apple CEO Tim Cook in November had cited slowing growth in emerging markets such as Brazil, India and Russia when Apple gave first-quarter sales estimates that were lower than expected. But he said then that he “would not put China in that category” of countries with troubled growth.
Onoging US-China trade tensions, which have anyways brought global markets down by a huge chunk, has also impacted Apple, and most other US tech companies. According to Reuters, investors have also dumped chipmakers and tech stocks other than just Apple’s and flocked to perceived safe havens like U.S. Treasuries and the Japanese yen.
A senior White House economic adviser, while speaking with Reuters, said that he expected trade uncertainty to hit earnings at many U.S. companies, but that sales at Apple and others with large exposure to China would recover once Washington and Beijing strike a trade deal.
That is having an impact on earnings and it’s not going to be just Apple.White House Chairman of the Council of Economic Advisers Kevin Hassett said in an interview with CNN.
“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.”