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: 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.

Apple Stock News: The Race to be the First Trillion Dollar Company May Depend on China

Apple Stock News

The race to get the title of first trillion dollar market cap is getting closer to the finish line.  Apple is sitting pretty with an $868B market cap.  Alphabet Inc. (Google) is in second place at $712B.  Amazon is in third at $556B.  Facebook is in fourth at $512B.  But Apple hasn’t always been in the lead.  It was temporarily overtaken by Alphabet Inc. in 2016.

What makes Apple the favorite in this horserace?  It’s not valuation.  Since Apple’s biggest driver is the iPhone, they are priced more like a hardware company.  That’s why Apple’s PE is 18 whereas Alphabet’s is 37, Amazon’s is 294, and Facebook’s is 34.  Although, Apple is investing heavily in its high growth Services business which could help to increase Apple’s P/E multiple in the future.

The main reason Apple is in first place is the tech giant generates so much darn profit.  They earn the vast majority of the profits of the entire smartphone space.  One significant differentiating factor that has helped them do this is their success in China.  Out of the four tech behemoths mentioned above, Apple is the only one that has truly flourished in the People’s Republic.  China is too big to ignore with 20% of the globe’s population.  In Apple’s 2017 fiscal year, they generated $44.8B in revenue from Greater China.  Even though that number decreased 8% YoY, it still amounted to 20% of Apple’s total revenue.  That 20% figure is much higher than the Chinese revenue generated from the other three tech titans.

Facebook doesn’t operate in China.  Alphabet does operate there, but many of its core services are severely restricted.  Amazon operates there as well, but is not even close to becoming a major player.

The Middle Kingdom’s significance to Apple has definitely incentivized them to keep the Chinese regulators happy.  This results in Apple removing hundreds of VPN apps from the Chinese App Store as well as building a data center in China to house Chinese users’ data.  Apple may not always like the Chinese regulations, but they certainly aren’t pulling out of China anytime soon.

For the latest Apple Stock News, AAPL closed at $169.01 per share on December 6th, 2017. It generated losses of 0.37% from its previous close on December 5th, 2017, when it closed at $169.64 per share.

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Apple Stock News: New VP and Managing Director of Greater China

Apple Stock News

For the latest Apple Stock News, AAPL closed at $151.02 on July 19, 2017. It had a gain of 0.98% from its previous close on July 18, 2017, at $150.08 per share.

apple stock news

Source: Apple Newsroom

Apple announced on July 18 that the company has appointed Isabel Ge Mahe, a China-born Wireless Technologies leader, as the vice president and managing director of Greater China. This move is in the hope of “deepening our team’s connections with customers, government and businesses in China to advance innovation and sustainability”, said Isabel.

The smartphone giant seems to be experiencing some trouble in China. Apple has been facing increasing competition from local players and more pressure from regulators. However, this newly created position shows the positive sign that Apple is on the right track toward winning back the market.

Isabel has led Apple’s wireless technology team for over nine years. According to Apple’s release, she has worked closely with R&D team and carrier partners in China to bring more customized features to the iPhone and iPad.

China still represents one of the most promising market to Apple. The fast-growing middle class stands as a large potential customer base. It is obvious to the naked eyes that Isabel is perfectly positioned for this new role. She would more than likely to be tasked to capture the second-largest economy.

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Apple Stock News: New Data Centre and Renewed Positioning

Apple Stock News

For the latest Apple Stock News, AAPL closed at $149.05 per share on, July 14th, 2017. It generated a return of 0.87% from its previous close on July 13th, 2017, when it closed at $147.76 per share.

On July 13th, 2017, Apple announced that it has plans to build its first data center in China. This will be in partnership with a Chinese data management company. Thus making Apple join the ranks of other tech giants who have made similar moves, including Amazon, Microsoft, and IBM.

From a product functionality standpoint, this data centre and any future data centres are predicted to rapidly improve the various iOS services that are present with the iPhone.

This new data centre is expected to allow Apple to operate at a much more competitive level with local Chinese smartphone producers. These companies have generally offered smartphone products noticeably cheaper than Apple’s iPhone. Unfortunately, this phenomenon has cost Apple dearly in China.

It is therefore a strong signal that Apple is taking the appropriate and necessary steps to close the gap that exists between it and local players. Together, these measures are believed to become a positive boost to the sales and profitability of the American tech giant.

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Apple Stock News: Apple Backs Foxconn to Buy Chip Business

Apple Stock News

For the latest Apple Stock News, AAPL closed at $153.93 on Monday, June 5th, 2017. It had a loss of 0.98% from its previous close of $155.45 per share.

Apple and Amazon are reportedly teaming up with Foxconn in its bid for Toshiba’s semiconductor business, according to Foxconn Chairman Terry Gou. This unit is the world’ second-largest NAND chip maker. Specifically, Foxconn’s bid for the business has a valuation of $18.2 billion. Foxconn is a multinational electronics contract manufacturing company with its headquarters in Taiwan.

Apple and Amazon have provided financial backing for the bid, though whether it was in the form of a direct investment in the business or financing for the deal is undisclosed. In particular, Foxconn is a major supplier to Apple. For instance, the company provides electronics components and device parts Apple products such as the iPhone. Moreover, Toshiba’s NAND flash memory chip business produces chips suitable for smartphones and cloud computing data centers. This aspect can explain Apple’s interest in backing Foxconn’s bid.

If the deal goes through, this can be an opportunity for Apple’s smartphone and cloud computing businesses. Foxconn’s chairman is reportedly very confident about securing the deal. However, there may also be political complications due to Foxconn’s ties to China, which may not be favorable in the eyes of Japanese regulators. On a positive note, with US technology giants, Apple and Amazon as backers of the deal, their presence may move the Japanese government to reconsider interference.

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Apple Stock News: Apple Remains Adament in China

Apple Stock News

For the latest Apple Stock News, AAPL closed at $142.27 on Friday, April 21, 2017. It had a loss of 0.12% from its previous close of $142.44 per share.

chinaapple

All the talk is about what’s in store for Apple this quarter. Current consensus estimates $52.61 billion, after an Apple guided indication of between $51.5 and $53.5 billion and $2.01 earnings per share.

iPhone unit sales are again expected to be strong, with 19 independent analysts expecting a slight uptick in sales. Apple sold 78.3 million iPhones in the previous quarter, up 5%.

China is the second-largest market being the US, the greatest amount of opportunity resides there.  Typically, countries create barriers for trade and China is no exception. Chinese regulators continue to make operations difficult, in a ploy to protect the local economy. Last year, Apple reported sales of $12.49 billion in the Greater China region. This year, consensus estimate sales to be down to $11.39 billion for the quarter. Despite the drop, Apple remains optimistic with the market potential in the region.

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Apple Stock News: Turning Struggle into Opportunity

Apple Stock News

For the latest Apple Stock News, AAPL closed at $135.67 on Friday, February 17, 2017 with a 0.24% gain, from its previous close of $135.34 per share.

This week Apple surpassed Samsung in market share during the fourth quarter of 2016. Now, new data from Canalys offers up a closer look at the smartphone market and China. Apparently, Apple is struggling to keep up with younger manufacturers such as Xiaomi.

Apple Stock News

Smartphone shipments in China hit 131.6 million during the fourth quarter of 2016. That’s the largest quarter total in history for the Chinese market. According to Canalys, smartphone shipments in China hit 476.5 million during 2016, an increase of 11.4 percent year-over-year.

In 2016, Xiaomi shipped 51.4 million units to take the fourth spot in the market. Apple, on the other hand, shipped 43.8 million smartphones, a decline of 18.2 percent compared to the year before. Due to its drop, Apple fell to be the fifth largest smartphone manufacturer in China, while Xiaomi leapfrogged to become third overall.

Although Apple shipped less smartphones this year, CEO Tim Cook remains optimistic about Apple’s future in China. Tim Cook and CFO Luca Maestri explained during Apple’s most recent earnings call that China represents a huge driver of growth. Specifically, Apple points to China as a driver of its ever-growing Services sector.

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Apple Stock News: Apple Manufacturing Expansion into India

Apple Stock News

For the latest Apple Stock News, AAPL closed at $116.64 on Wednesday, December 21, 2016 with a 0.09% gain, or $0.11 from its previous close of $116.95 per share.

Apple Stock News

As we all know, President-elect Trump wants to bring jobs back to America. Apple is one of the companies that Trump has talked about moving their manufacturing back to the United States. In 2013, Apple reinvested $100 million into US manufacturing by strictly producing their MacBook Pros in Austin, Texas. This was a great idea in theory, however; the factory had to train workers and use custom made tools for the production which then negatively affected production. Because of these factors, the factory was much slower than previous factories abroad and the company could no longer meet demand. Movement of their production facilities in general would be a huge expense as well as a hassle.

Recently, Apple is starting to look for expansion of their manufacturing into India, similar to how they produce products in China. Though Trump is trying to shift their gaze to the United States, it seems like Apple isn’t going to change its stance.

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