What Is Causing Apple Stock To Fall Right Now?
Apple cuts its profit forecast.
Apple (NASDAQ: AAPL) slashed its revenue forecast on Wednesday for the December holiday quarter, with management attributing the revenue cut to unexpected impact from economic declines in China.
For a brief moment, trading on Apple stock was paused as Tim Cook addressed shareholders, explaining why the revenue forecast was cut. Once Apple stock resumed trading, its stock price fell by 7.45%, cutting the company’s market cap by $55 billion.
Tim Cook had this to say “While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in greater China. In fact, most of our revenue shortfall to our guidance, and over 100% of our year-over-year worldwide revenue decline, occurred in greater China across iPhone, Mac and iPad”.
This is majorly alarming to share holders, as Apple haven’t had to issue a profit warning since 2002 and this is the first time since the iPhone has launched.
China’s Impact On Apple Stock
Global trade uncertainty has caused China’s economy to take a significant hit, which has impacted most tech stocks. China is Apple’s third largest market after the US and Europe. So when sales in China are lower-than-expected, Apple stock price gets strongly impacted.
It was clear that China’s economy was slowing down after September last year, when the government announced that the quarter during September had the second lowest GDP growth in 25 years. Cook also said that economic instability in China has caused in-store traffic to decline from September. All smartphone sales in China have been fluctuation greatly from the second half of 2018.
On a more optimistic note, Cook states his opinion on Apple’s future in China. Saying “We believe that our business in China has a bright future.” For shareholders, these optimistic comments should bring some relief as long-term gains for Apple stock are still possible despite some real challenges that the Chinese economy presents.
Lower-than-expected sales demand for Apple’s latest iPhone models has also been a concern for investors. The lowering demand for the iPhone XR has caused some analysts to downgrade Apple Stock causing further selloffs.
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