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Apple Stock News: Large Impact After Apple is Downgraded

In last week’s Apple stock news, there was a large focus on Apple designer Jony Ive leaving. He set out to set up his own company LoveFrom with Apple as a client. Jony Ive was a long term employee with Apple and had a large impact on all of their products from IPod, IPhone to Mac. There was also a positive outlook on Apple because of the relaxed regulations with China. The agreement from President Xi Jinping and Trump increased the stock of 3.12%.

This week there is a switch in perspective on Apples stock outlook. From July 8 to July 9 the stock dropped from $208 to $198. This is likely due to a downgrade by Rosenblatt to ‘sell’. Rosenblatt securities has made statements saying that they believe Apple will face fundamental deterioration over the next 6-12 months. However, they are still maintaining the 12-month $150 price target. This is in part due to Jony Ive leaving the company, and the new IPhone sales are expected to slow in the second half of 2019.

Recently, it seems Apple has been working to ensure their customers feel safe and have privacy. The walkie-talkie feature on the watch created a vulnerability to people because a bug was found that allowed people to listen to conversations. Apple quickly disabled this feature in order to fix it, and this proves the dedication and intent to stay loyal and a allow privacy.

Source: CNBC.com

Apple also announced this week that executives will be attending the Sun Valley conference in Idaho with large corporate leaders. This networking session is where many large deals have taken place including Disney’s $19 billion ABC/Capital Cities buyout The conference is an opportunity to communicate and may be an opportunity for growth. Apple intends to focus on their new services of Apple Arcade and Apple TV+. The new service will set them apart from competitors and we will see this week if any large deals take place.

Source: Roger Fingas Appleinsider.com

All of these news releases have a large impact on the S&P because of the size of Apple. Apple has a trillion-dollar market cap and has a major influence of leading indexes and ETFs. Apple is 3.37% of the S&P 500 and substantial amount of decisions are made based on their success. Apple determined the technology sector as noted “The S&P 500 Technology sector has never outperformed the S&P 500 when AAPL has plummeted more than 30%.” — Bank of America Merrill Lynch.

Apple Stock News: Apple regarded as the big winner for trade war truce

In last week’s apple stock news, we mainly focused on Apple’s dive into the self-driving space, its partnership with Shopify to expand its iMessage Business Chat, and Apple’s broadening presence in the budding tech hub of Seattle.

In the past week Apple’s stock price (Nasdaq: AAPL) saw a sudden increase of 3.12% at the beginning of July 1st induced by the agreement U.S. President Donald Trump and Chinese President Xi Jinping reached at the G20 meeting in Osaka Japan over the weekend. The price decreased slightly later on that day and remained stable in the following days. 

This week we focus on the latest update of Trump-Xi trade war, famed designer Jony Ive’s leave from Apple and Apple Music’s announcement to hold Up Next Live this summer.

Famed Apple Designer Jony Ive is leaving Apple, collaboration will continue

Jony Ive announced that he is leaving Apple and is about to set up his new company in creative business named LoveForm, with Apple as the first client. Jony Ive has worked as Apple’s chief design officer for nearly 30 years, his impact on the company can be seen from classical individual device such as iPod, iPhone and Mac to the “Spaceship” Apple Park. 

Apple’ stock price fell 1.17% on 28 June, after the news was released on previous day.

(Source: NOAH BERGER via Getty Images)

An article was published on June 30 in the Wall Street Journal, implying the reason why Jony Ive is leaving Apple is that he was disappointed by Tim Cook’s lack of interest in design. Tim Cook fired back at the article, calling it “absurd” and “distorts relationships, decisions and events”.

U.S. and China agreed to make concessions on both sides of the trade war

During the G20 meetings, Trump relaxed his ban on US companies doing business with Chinese high-tech giant Huawei, the leading company in the emerging 5G market. Besides, Trump also agreed not to add new tariffs on Chinese exports, but the earlier 25 percent duty will remain. Correspondingly, Xi promised that China would import more agricultural goods from the U.S..

(Source: WorldFinance.com)

Induced by the news, Apple’s stock price saw an apparent increase on July 1st after the weekend. According to Wedbush analyst Daniel Ives, Apple is the big winner of the trade war truce since it has become the poster child of American companies faced with the trade war. He also thought Apple would set aside its plan to move its production out of China as long as the trade negotiations are on track.

Apple Music brings Up Next Live to global cities this summer

On July 1st, Apple announced to hold Up Next Live this summer, inviting Apple Music Up Next artists including “Bad Bunny, Daniel Caesar, Khalid, Ashley McBryde, King Princess, Lewis Capaldi and Jessie Reyez”. These 7 artists will perform after-hour concerts at 7 different Apple Store locations all over the world.

(Source: Apple Newsroom)

Apple Stock News: Apple’s Expansion Mode Is In Full Effect

In last week’s Apple stock news, we discussed Apple’s plans to shift production out of China with the hopes of avoiding ever-increasing tariffs, the impact of the Fed’s decision to not cut interest rates on Apple’s outlook, and why slowing iPhone sales may be a real cause for concern.

Since then, Apple’s stock has performed at mostly a flat level, as many investors are hesitant to make major movements ahead of this week’s G20 meetings between major political leaders, including a long-awaited sit down between President Trump and China’s Xi Jinping.

This week, we highlight Apple’s dive into the self-driving space, its partnership with Shopify to expand its iMessage Business Chat, and Apple’s broadening presence in the budding tech hub of Seattle.

Apple Acquires Drive.ai, Joins The Self-Driving Wave

(Source: Wikimedia Commons)

On Wednesday, Apple confirmed its acquisition of autonomous vehicle startup Drive.ai. Details about purchase price are yet to be released, but Drive.ai has raised a total of $77 million since it began operations in 2015. The deal comes a week after the Mountain View startup laid off 90 California employees. 

Founded by ex-members of Stanford University’s Artificial Intelligence Lab, Drive.ai piqued Apple’s interest due to its recent testing of a free ride-hailing service in two Texas cities. The purchase by Apple, who is alleged to have already hired ‘dozens’ of Drive.ai engineers, arrives a few months after the conglomerate reportedly fired 190 employees from its own autonomous vehicle group, Project Titan.

Looking ahead, Apple’s move could be the match that starts a firestorm of consolidation throughout the self-driving industry, with major tech companies such as Amazon, Uber, Google looking to overtake smaller startups.

“Self-driving is five to seven years away from monetization. And regulatory will be a big issue.” – Dan Ives, analyst at Wedbush Securities

Expansion of iMessage Business Chat into Shopify Online Stores

(Source: Wikipedia)

Shopify, an internet marketplace provider, just gave Apple’s blossoming iMessage-based Business Chat a big boost when it agreed to add the feature to its existing customer communication app, Shopify Ping. 

For the over 800,000 online retailers using Shopify to progress their sales, Shopify Ping has provided a medium to communicate with their customers, and answer their pressing questions about various product offerings, in a secure and inviting setting. While the addition of iMessage can only help, many of these companies already expand their omnichannel through the use of platforms such as Facebook Messenger.

Yet, the benefits of adding iMessage Business Chat come in the ability for customers to use Apple Pay to purchase products directly in the chat. The combination of Apple Pay and iMessage creates the potential for transactions to take place before the customer has time to second guess their purchase.

As major technology firms such as Apple and Facebook look for new avenues to monetize their services, it will be intriguing to see if this newfound form of payment, sometimes referred to as ‘message purchasing,’ becomes widespread due to its simplicity or fizzles out due to its prospective harm to consumers’ wallets.

Apple Set To Add 2,000 Jobs In Tech Hub 2.0: Seattle

(Source: Wikimedia Commons)

In an announcement made on Tuesday, Apple revealed plans to create an additional 2,000 jobs in Seattle within the next five years. Despite currently employing 500 workers in the city, Apple wants to gain more engineering and computer science talent, and expects an additional 200 Seattle-based employees by the end of the year.

The move by Apple comes amidst a larger trend of major technology companies, namely Amazon and Microsoft, to place their headquarters in the northwest city. One main reason Seattle has become a popular spot for these multinationals to park their base is due to the fact that Washington state law prohibits an income tax from being in effect. 

The arrival of thousands of jobs is supposed to spur widespread economic development. Yet, the allure to technology companies has brought with it a substantial cost to the city’s established residents, in the form of immense homelessness and affordable housing issues. Put simply, the large influx of workers with higher salaries than the existing residents pushes housing costs through the roof, thus creating rapid homelessness.

To put the problem in perspective, a Seattle housing lottery that aids low-income individuals with their monthly rental payments received over 21,500 applicants in 2017 only to have enough funding for 3,500 entrants.

“As Seattle continues to grow, we must act urgently to address the pressures that follow — from tackling affordability to new affordable housing to increasing transit,”  – Seattle Mayor Jenny A. Durkan

Apple Stock News: Apple Gearing Up for Trade War

On last week’s Apple Stock News, antitrust probes by the government threatened Apple’s stocks. Other tech giants such as Alphabet, Amazon and Facebook were not spared.

Such threats resulted in Apple stocks plunging in May but it has since mostly recovered. However, should news of antitrust probes start spreading again, Apple stock is likely to fall. Apple bears will be on the lookout for any bad news.

This week, the focus is on Apple’s decision to shift production out of China, interest rate cuts and low iPhone sales.

Apple Preparing for Battle

Source: Foxconn

Trade war tariffs placed on $300 billion worth of Chinese goods would drive prices of Apple’s best selling products up. This would render them less attractive to customers, potentially causing them to turn to Apple’s competitors.

For this reason, Apple has asked Foxconn to shift 15 to 30% of its production out of China to Southeast Asia.

Hon Hai Precision Industry, also known as Foxconn Technology Group, is Apple’s largest supplier.

This Taiwanese contractor currently makes most of its smartphones in mainland China. Escalating trade wars have forced Apple to reevaluate having so much production in China.  

“Twenty-five percent of our production capacity is outside of China and we can help Apple respond to its needs in the U.S. market.”

Foxconn’s board nominee and semiconductor division chief, Young Liu

Interest Rate Price Potential Drop

Source: XinHua/Zuma Press

Federal Reserve Chair, Jerome Powell, said that the central bank is willing to take monetary policy measures to ensure the US economy’s continued expansion. It raised investor’s hope of either a cut in interest rates or a rate cut.

However, their hopes were crushed. On 19 June 2019, a divided Federal Reserve indicated formally that no cuts are coming in 2019. This decision could drive tech companies stocks like Apple lower.

Despite the news, there is a possibility that policy loosening could happen before the end of the year.

“Many participants now see the case for somewhat more accommodative policy has strengthened.”

Jerome Powell, Federal Reserve Chair

Should the Feds carry though with their decision, it will drive tech stocks up significantly.

iPhone Demand in Decline Spelling Trouble for Apple Stock

Source: Apple

Revenue from iPhone sales plunged 17% to just over $31 billion in the last quarter. As a result, waning iPhone demands are keeping investors on their toes.

Furthermore, competition from China’s smartphone brands like Huawei, pressure on lowering selling prices and slower upgrade cycles all contribute to the slowing demand.

Huawei, Apple’s neck to neck competitor, saw sales climb 39% during that same quarter. The Chinese tech giant continues to gain considerable market share in China, whilst Apple loses its footing. US ban on Huawei have fueled the Chinese nationalistic pride. Growing support for their home-grown brand, Huawei, have sent Chinese citizens dumping Apple for Huawei.

Apple Stock News: Apple Surges 13.5% Amid Easing Tensions

Summary

  • Apple market volatility will continue to be dictated by China trade woes and other political news
  • iPhone Sales down 25% in China
  • WWDC garners mixed headlines and negative press from $1000 monitor stand

Exposure to China

Given that China alone accounts for approximately 20% of Apple’s net sales and manufactures its products there, it has significant exposure to their economy and trade between China and the US which accounts for approximately 40% of their sales. In light of current looming trade disputes and a slowdown in the Chinese economy, Apple has suffered significant declines there. In the trailing 6 month period ending March 30, 2019, Apple suffered a 25% decline in sales in China year over year from $30,980,000,000 to $23,387,000,000. Although other regional sectors of the business also experienced some decline, China was the worst performer by far. In the same time period, European sales declines 4%, Japanese declined 2%, Asian Pacific declines 2%, and the Americas is the only area that showed growth at 4% . Whereas the general small declines in sales are due to a mature smartphone market with growing competition where Apple represents the priciest option, Apple’s slump in China can be attributes to macroeconomic factors. In light of these general declines, Apple is becoming more proactive and aggressive in marketing and selling its iPhones. A recent tactic has been to offer 0% financing .

Huawei Competition

In the first quarter of 2019, Huawei overtook Apple as the second largest smartphone maker behind Samsung. Huawei shipped 39.3 million phones in the first quarter of 2018 compared to 59.1 million shipments in quarter 1 of 2019. This growth has come almost exclusively from China while it remains barred by the Government from doing business in the US, Apple’s crown jewel within global markets. In the scenario that there is a breakdown in trade talks and severe escalation in the trade conflict between the US and China, Apple could be subject to a retaliatory move from the Chinese side. If iPhone sales were banned in China as Huawei is banned in the US, this would immediately wipe 20% off from Apples bottom line and presumably at least that much from its market capitalization.

Looming Antitrust Probes

On June 3, 2019, on the first day of Apple’s much anticipated WWDC (Worldwide Developers Conference) news broke that Apple was the subject of an antitrust probe along with other big names in tech such as Google, Facebook, and Amazon which triggered an industry wide selloff as the NASDAQ 100 index fell by almost 2% that day.

Apple Worldwide Developers Conference Summary and Aftermath

Apple’s Worldwide Developers Conference took place from June 3 through 7 and although Apple headlines were undermined by news of the antitrust probe on the first day of the conference, the conference yielded much positive news and interest. Updates include an overhaul of TVos and Apple TV as well as details regarding iOS 13, MacOSCatalina and the iPadOS which is the operating system for the iPad. Regarding hardware updates and improvements, they announced the Mac Pro and Pro Display XDR as well as specs for the new Mac Pro.

This did however garner some controversy and negative press in what can be described as a massive PR blunder. They announced their starting price for their Mac Pro Monitor at $4999 with an optional stand for $1000. Critics described this as everything that’s wrong with Apple and some consumers are frustrated with paying 1000 for what is essentially a piece of metal. Other companies like Microsoft have it included with their monitor. The consensus is that this should have been presented as a $6000 computer which is a fair price considering the alternatives which generally range from $10,000 to $43,000.

Stock Performance Summary

Since bottoming at $170.27 per share on June 3rd following antitrust headlines, the stock has rallied to over $194, almost exactly halfway between the 52 week range of $233.47 and $142.

Apple Stock News – Antitrust Probe Laws Ruins Mood for WWDC

Source: Apple Inc

The highly anticipated Apple Worldwide Developers Conference (WWDC) 2019 is happening as we speak, in San Jose, California. From 3 to 7 June 2019, apple fans will been given the latest tech updates and investors will be watching stock prices closely.

However, on Monday, 3 June, news broke that Apple was facing possible jurisdiction for an antitrust probe, causing major unrest for investors as stock prices fell that very day. Meanwhile, trade war tensions might be dissipating.

Antitrust Probe – A Toothache for Apple

Source: Bloomberg

On Monday, 3 June 2019, Apple stocks fell despite trying to put their best foot forward in WWDC. The US Department of Justice has secured jurisdiction to investigate Apple on antitrust probe concerns. Sources on Reuters, unfortunately did not specify what issues led to them wanting to pursue an antitrust probe.

Other tech giants such as Amazon, Alphabet and Facebook are also undergoing concurrent antitrust probes.

Apple’s stock fell by as much as 2.4% at $170.87 following a release on the report about the antitrust probe, despite being positive earlier in the day. By the end of Monday, Apple stock had rebounded slightly and closed at $173.30, with a drop of 1%.

WWDC – What’s the Latest News Mac?

Source: The Verge

On the other hand, in the WWDC 2019, Apple has announced some new and exciting updates, including a Mac Pro and Pro Display XDR, iOS 13 with a dark mode, MacOSCatalina and an operating system for the iPad called iPadOS.

iTunes will be cancelled and instead broken up into three apps; Apple Music, Apple Podcasts, and Apple TV. This is to cater to the new ways consumers buy and stream media.

They also announced the latest Mac Pro with the most up to date and powerful specs. However, it has gained a lot of traction for the wrong reasons as the design of the mac pro has ended up looking a lot like a giant cheese grater.

iPhone introduced a dark-mode for system menus and native apps. Whilst the launch speed for apps should be much quicker. With iPad’s new software updates, switching between apps will now be more seamless.  

Trade War Tensions Might be Dissipating

“The differences and frictions between the two sides in the economic and trade field will ultimately need to be resolved through dialogue and consultation.”

China’s Ministry of Commerce

Following the release of the statement in early June, investors can feel slightly hopeful. The Trade War tensions have been going on for months, putting investors and consumers on edge.

Any tariffs placed on Apple products will have an undesirable impact. According to analysts, every 5% drop in China’s sales will result in an earnings per share drop of about 15 cents. This is due to the fact that China is Apple’s third largest market and Apple relies on chinese workers for assembly of their products.

Source: Bloomberg

On 10 May 2019, the Trump Administration raised tariffs from 10% to 25% on $200 billion goods after failed negotiations. Three days later, China threatened to raise tariffs on $60 billion worth of US goods. With the escalating trade war tensions in the month of May, Apple Stocks have certainly taken a hit.

Goldman Sachs estimated that Apple’s earnings would fall by 29% if China were to retaliate against the US with a ban on sales of the iPhone maker’s products.

Apple Stock News: Gloom From US-China Trade War Is Here To Stay

Investors used to be optimistic about Apple in the trade war

While Apple’s stocks have been unmistakably suffering this month from the US-China trade war, its prospects were not always so gloomy. When the Trump administration initially declared sweeping tariffs on China, it exempted Apple in order to assuage the appetites of voracious American iPhone consumers. In fact, last week, the stock was still trading on a P/E ratio 14.6 forward Wall Street profit estimates, which was below the forward P/E multiple on the Dow Jones (of 15.7 times) and the S&P 500 (of 17.2 times).
Yet with a second round of tariffs on the horizon, Apple’s prospects are not so sunny. Especially after May 17, when the Trump administration banned Huawei from purchasing the American components it needs to manufacture its products (for allegedly aiding Beijing in espionage), the risk of Chinese retaliation is heavy on Apple’s shoulders.

China is key to Apple’s sales and revenue

It cannot be stressed how important Apple’s operations in China is to its sales and revenue. In the past fiscal year, $51 billion of Apple’s sales came from China, deeming the country Apple’s third biggest region, only behind the Americas and Europe. Moreover, Apple relies on China for about a fifth of its revenue.

Analysts are drawing up estimates for how much damage China could inflict with retaliatory policies. As Huawei struggles to replace its American parts with self-manufactured ones, Apple is China’s next likely target if Beijing continues to pursue its “tit-for-tat” strategy. While analysts at Goldman Sachs believe that a ban on Apple product in China is still unlikely at this point, such a ban or “some other restriction on Apple products” could dent Apple’s earnings by 29%. What’s more, China does not have to ban production directly to cut into Apple’s supply chain. China could pursue other methods such as a ban on rare-earth metals or promoting nationalist sentiment among consumers.

Optimism for Apple’s immediate recovery is fading

The biggest problem Apple faces today is that the key factor which could trigger all of these looming risks–international trade policy–is surrounded by so much uncertainty. As of now, the next opportunity for a Trump-Xi dialogue is at the upcoming G20 Summit in Osaka in late June. Even then, it is not certain that such a dialogue will exist or that it will be ameliorative.

These questions up in the air have definitely thrown Apple on a downwards slope. Goldman Sachs has lowered its target price for Apple to $178 a share. This estimate seems appropriate seeing that the stock has dropped about 10% in May, and about 20% from its highs in October 2018. Yahoo Finance’s Scott Gamm pronounced that its stock is officially in bear market territory.

So is Apple hitting bottom anytime soon? Are we nearing the end of its turmoil? The answer is “probably not.” Erin Gibbs, equity chief investment officer at S&P Global Market Intelligence, tells Yahoo Finance that with so much uncertainty surrounding “fundamental catalysts” such as trade, there is “definitely more room for Apple to go down.” In short, with such a key part of its sales essentially being held hostage in one of the fiercest trade wars of this decade, Apple’s stocks can be predicted to continue to fall victim to this unrelenting uncertainty.

Apple Stock News: Apple’s Revenue Hits An All Time High

Summary:

  • Apple’s Services Revenue Reaches New All-Time High of $11.5 Billion
  • The U.S. Supreme Court ruled that consumers can press ahead with a lawsuit that accuses Apple (AAPL) of using its market dominance to artificially inflate prices at its App Store.
  • Apple’s market share in the global smartphone market is shrinking.

Sticky Situation For Apple

The U.S. Supreme Court ruled that consumers can press ahead with a lawsuit that accuses Apple (AAPL) of using its market dominance to artificially inflate prices at its App Store. The US Supreme Court voted 5-to-4 to allow an antitrust lawsuit against the tech giant to move forward. This decision piles on the pressure the company faces to cut the 30% commission it charges on app sales. Lawyers pressing the case plan to seek hundreds of millions of dollars on behalf of overpaying consumers. Apple fell 5.8% to close at $185.72 on the stock market on that day.

[Yahoo finance]

When a user buys an app on Apple’s app store, Apple collects the money, keeps the 30% commission and gives the rest to the developer. Apple told the high court it passed $26.5 billion on to developers in 2017. The company is part of an app economy that will grow from $82 billion last year to $157 billion in 2022, according to App Annie projections.

In the Apple lawsuit, the company argued the case’s focus was the 30% commission. That’s something the company said is paid by the developers, not the app purchasers. The consumers said they pay for the commissions through higher app prices. But Apple contends those are the type of “pass-through” damages barred under the Supreme Court’s 1977 Illinois Brick v. Illinois ruling. The high court did not touch on the merits of the case, which contends the company has monopoly power over iPhone users because the only place they can buy those apps legally is run by the company.

Shrinking Problem

Apple’s market share in the global smartphone market is shrinking, and the company’s margins are being compressed due to declining iPhone sales and increased competition. This leads me to believe that Apple will likely have to lower iPhone prices to better compete with its cheaper competitors.

In addition, the recent earnings report was not great in my view, and the company may disappoint investors in future quarters. The technical image also looks weak, and we could see another 15-20% correction from here. Between Q4’18 and Q1’19, Samsung has taken a 5% leap in the smartphone market share, while Apple declined by 7%. Huawei has since overtaken Apple in second place.

[Statista]

Trade War

[Financial Times]

In the ongoing trade war between US and China, tariffs of 25% on $200 billion of chinese goods were made on the 13th May. The tariffs could add about $160 to the cost of a $999 Chinese-made iPhone XS. The increased cost of the american branded chinese made product could have detrimental effects on the sales of its products, with strong competition coming from Samsung and Huawei. However, one thing to note about the tariffs is, the cost of the tariffs to consumers. The new 25% tariff is levied on components, not the finished product. Apple’s AirPods and Apple Watches are spared additional tariffs. Any calculations made pertaining to the costs will not be straightforward.

Although Apple has a lot of American suppliers and spent $60 billion on American suppliers in 2018, it assembles its iPhones primarily in China. As a result, Apple uses a Chinese supply chain for all its products, from iPhones to iPads and Mac computers, hence being a primary victim of the trade war. It’s korean competitor, Samsung which has plants in Vietnam, China, India, Brazil, Indonesia and Korea, is far more diversified in its supply chain. To address this issue, Apple has reportedly stepped up efforts to shift production from China.

Shipments of iPhones to North America, Apple’s largest market, fell 19% to 14.6 million units in the first three months of the year. Also, Tariffs could also affect iPhone sales in China, where On Monday, China announced plans to apply 25% duties on 2,493 US products, starting on 1 June. Apple reported $51 billion in revenue in 2018 from “Greater China,” which includes Hong Kong and Taiwan. That’s Apple’s third-biggest region, after the Americas and Europe. Apple’s total revenue for 2018 was $265.6 billion. This could mean a lower revenue in the future quarters.

Everything else is thriving

[Idgesg.net]

Even though Apple has faced legal troubles and the potential force of the trade war, investors should not worry. Apple is doing well in services, that its service revenue has increased to $11.5 billion in the Q2 2019 financial report. That can be attributed to paid subscriptions, which nearly topped 400 million for an increase of 30 million over last quarter. The company also posted quarterly revenue of $58 billion , which is a decline of 5 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.46, down 10 percent.

International sales accounted for 61 percent of the quarter’s revenue. iPad sales were also up, fueled by the release of the fifth-gen iPad mini and the new iPad Air. Apple also sold $5.1 billion worth of Apple Watches, AirPods, and other accessories in the Q2’19, a 30 percent increase over the year-ago quarter. We should also not forget that Apple announced that they will no longer reports iPhone, iPad, and Mac unit sales numbers.

AAPL Stock Prediction: 0%-Interest iPhone Installment Plan Is A Tailwind for Apple

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

  • Apple’s stock is now a buy because it is willing to be more aggressive in marketing its pricey iPhone products.
  • The big decline of iPhone sales in China last year is being addressed through lower price tags and 0% interest installment plans.
  • The interest-free iPhone installment plan is implemented through Ant Financial, a subsidiary of Alibaba.
  • The more iPhones it can sell, the better it is for Apple’s fast-growing Services revenue segment.
  • The predictive algorithm of I Know First has a very bullish 12-month forecast for AAPL. Weekly technical indicators and moving averages hints AAPL is a buy.

Apple (iPhone) has a debilitating headwind in notably weakened iPhone sales in China. Tim Cook blamed China as primary reason why Apple has shortfall in iPhone sales. The holiday quarter earnings report was upsetting because 4Q2018 China iPhone sales went down by -19.9%.  This is depressing because the China market accounts for 18 to 20% of Apple’s revenue. The two charts below explained the severity of Apple’s China problem.

 

Apple’s Q1 2019 (Q4 of 2018) revenue from China iPhone sales plunged to $13.2 billion. This was 36.4% lower than Q1 2018’s $18 billion. The steep dive in China is why Apple’s Q1 posted a -15% Y/Y dip in total iPhone revenue to $52 billion.  It is only judicious therefore for Apple to be more aggressive in marketing iPhones in China.

How Apple Is Addressing The China Difficulty

Tim Cook hinted last month that cheaper iPhones is highly likely this year. It’s a no-brainer for Apple to lower the price tags of its iPhone XS and iPhone XR handsets. Chinese firms like Huawei, Xiaomi, Oppo, and Vivo are offering sub-$500 flagship smartphones. The Xiaomi Mi 9 is less than $500 but it has better camera/video performance and is the fastest smartphone to date.

Xiaomi became no.1  in India. Apple never made it to the top 10 in India for the past five years. This is due to the overpricing of iPhones versus Chinese flagship Android phones. Perhaps after solving the China headwind, Apple will refocus its strategy in India. India now accounts for 10% of global smartphone sales.

While the rest of the world saw a 9.7% decline in smartphone shipments, India posted a 14.5 Y/Y growth last year.

The easiest way for Apple to disrupt the massive sales of Huawei and Xiaomi is for it to lower the price tags of its flagship phones. It is hard to grow sales of $1,000 and $800 iPhones when Xiaomi and Huawei can sell equivalent handsets at less than $500.

The other solution that Apple hopes to reverse the iPhone’s decline in China is zero percent installment plans for new iPhone buyers. This China-exclusive offer is in partnership with Ant Financial – the payments processing firm owned by Alibaba (BABA).

Chinese customers can buy an iPhone XR via installment payments of 271 yuan ($40.71) per month. The monthly installment payment for iPhone XS is 362 yuan ($53.92). The iPhone XR retails for 6,499 yuan ($968) in China. The iPhone XS sells for 8,699 Yuan ($1,295.61).

Other banks in China are also offering the same interest-free iPhone installment plans for Mainland Chinese. This special promo from Apple should help reverse the decline of the iPhone in China. Going forward, Apple can become a top vendor in India if it also offers the same zero-percent installment iPhone plan. Heck, this could be a massive sales booster for global iPhone sales if Apple offers this promotion in all countries.

Why Apple Needs To Sell More iPhones

Cheaper iPhones and 0% interest installment plans are necessary toward selling more iPhones. Apple needs more people using iOS devices to further increase the momentum of its fast-growing Services business segment. The more active users of iPhones, Apple TV, iPads there are, the bigger Apple’s income from iTunes app store sales and subscription payments.

The Services segment is now a $37.2 billion/year catalyst for Apple.

Apple Music and the upcoming paid streaming TV/video service are iOS/macOS exclusives. My takeaway is that Apple can sacrifice its high margins on hardware products because it can recoup this via increased in-app purchases and subscription payments.

Conclusion

Apple lowering its margins on iPhone hardware sales is a strong reason to stay long (or buy more) AAPL. Lower price tags and interest-free iPhone installment plans can boost the sales of iPhones in China and in any country.

My buy rating for AAPL is backed by its bullish one-year predictive market trend forecast from I Know First. AAPL’s market trend score is above 100 (178.42) and I Know First’s predictability score for AAPL is 0.76. I Know First has a great history of correctly predicting 12-month market movements of Apple’s stock.

How to interpret this diagram.

Further, I checked the weekly technical indicators and moving averages. They suggest AAPL as a buy right now.

(Source: Investing.com)

Past I Know First Success with Apple Stock Forecast

I Know First has been bullish on AAPL shares in past forecasts. On September 8, 2017, the I Know First algorithm issued a bullish 1 year forecast for AAPL with a signal of 165.93 and a predictability of 0.61, the algorithm successfully forecasted the movement of the AAPL share.  After a year, AAPL shares rose by 37.23% in line with the I Know First algorithm’s forecast. See chart below.

This bullish forecast for AAPL was sent to I Know First subscribers on September 8, 2017.

To subscribe today click here.

 

Please note-for trading decisions use the most recent forecast.

Apple Stock News: Hope and Expectations for 2019

Apple Stock News: Hope and Expectations 2019

Apple’s first quarter of the year is the one with biggest sales and higher margins due to a seasonal effect. The recent Q1 earnings report showed decline in profit margins, even though analysts had a “better than feared” reaction and Apple stock price went up. Let’s see what do we expect from Apple in 2019.

Apple Music and American Airlines

Apple music is now available in American Airlines flights since the 1st of February. Apple Music subscribers will have access to more than 50 million songs on any domestic flight equipped with Viasat satellite Wi-Fi with no Wi-Fi purchase required.

(Source: wikipedia.org)

Office 365 available on Mac App Store

Now for Apple users it is easier to download office applications. This apps, also can be easily distributed to employees using Apple Business Manager enabling to work in any Apple device.

AirPods

According to the reliable Apple analyst Ming-Chi Kuo, a new AirPods model is expected in 2019. The most popular accessory of Apple will have new features. With the New AirPods you will be able to activate Siri only with your voice, they will also improve water resistance, noise cancellation and Bluetooth signal. As well, they will include wireless charging and are going to be smaller than the current model.

(Source: flickr.com)

Apple News subscriptions

Apple News will offer more premium options. According to Bloomberg, in 2019 Apple will offer an all-you-can-read magazine subscription plan, taking advantage of its Texture acquisition.

(Source: wikipedia.org)

Mac Pro

Mac Pro has not been updated since 2013, but Apple announced in 2017 for this year would be finished a new version for Mac Pro. The revamped modular version would be the highest-end, high-throughput desktop system to allow the future upgrades and higher-end hardware. A design for their demanding pro customers, they said.

iPhones in 2019

New iPhones are coming in 2019. Apple is expected to provide three new iPhones in similar sizes as the current ones (iPhone XS, XS Max and XR).

Are plans to launch the new iPhones with a 3-D camera. This would be an important upgrade to the current camera, will work up to about 15 feet from the device. Also, it will power the Face ID feature. This camera would enhance augmented reality functions, allowing better placement of virtual objects on the screen and a more accurate depth perception. However, Bloomberg says plans to include a 3D sensor on the 2019 iPhone models have been delayed, and the technology will come on the 2020.

Regarding the other features, is expected to use OLED displays and an upgraded A13 chips, bringing improved performance and efficiency.

(Source: pixabay.com)

iMac

There is hope for a new iMac for 2019. The current iMac is two generations behind the 9th-generation Intel Coffee Lake Refresh. 2019 update is expected with faster processors.

MacBook

The MacBook also didn’t get a 2018 update. It could be updated in 2019 and might be with new processors and there have been rumors that MacBook will be the first to get an Apple-designed ARM processor, but we will see.

iPad Mini

New iPad mini is expected for this year. The 7.9-inch iPad would have an upgraded processor, at least the level of performance of the iPad 2018 (Apple A10 Fusion CPU). iPad mini 5 will have a lower-cost panel, Apple pencil support and Smart Keyboard connectivity.

(Source: flickr.com)

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