Apple stock was down more than 9 percent overnight and continued the downward trend in trading this week. The company’s stock price is down a total of 38 percent since October. Since the iPhone update market dropped, it was having a significant effect on earnings, at least in the short term, and Apple stock took a big hit consequently.
On October 3, the stock was selling at 232.07 per share. While the price has fluctuated along with the marketplace, the stock has been on a downward trend for the past few months and has lost roughly $87 per share because of that October high point.
Last January 2, before the firm briefly stopped trading to make its announcement, the stock stood at $157.92 per share. But on January 4, it was regaining a bit but was still down 8.19 percent to $144.98.
D.A. Davidson senior analyst Tom Forte says yesterday’s statement, although not completely unexpected, was surprising, given Apple’s traditionally dominant position. “We understood that iPhone unit sales were weak, but not how weak,” he explained.
The most significant factor in the announcement, in Forte’s opinion, was China, in which he says the company generates 20 percent of its sales. As the U.S.-China commerce war drags on, it’s affecting those sales. This might be because of a combination of variables, such as a weakening Chinese market as a result of the trade warfare, or patriotism on the part of Chinese customers, who are choosing to buy Chinese brands instead of iPhone.
This already helped weaken the iPhone sales globally, but Forte still sees the Chinese economy as the most significant factor in play here.
Forte says that in spite of the soft iPhone performance, the good news is that the remainder of the product portfolio is up 19 percent, and that could bode well for the long run. What’s more, the business has set aside $100 billion for stock buy-back functions. “They have the balance sheet. They still create very significant free cash flow, and if the individual investor will not purchase the stock, then the company is going to buy the stock,” he clarified.
In a report released this morning, Canaccord Genuity financial analysts consider that in spite of yesterday’s news, the provider is still fundamentally sound and they continue to recommend a BUY for Apple stock. “We maintain our belief Apple can enlarge its leading market share of the premium-tier smartphone marketplace and also the iPhone installed base (excluding refurbished iPhones) will surpass 700M in 2018. This striking installed base should drive iPhone replacement earnings, in addition to cash flow generation to fund powerful long-term capital yields. We reiterate our BUY rating but reduce our cost target to $190 based on our reduced quotes,” the firm wrote in a report released this morning.
Forte says the unexplained here’s the way the U.S.-China trade war plays out, as long as the situation remains changeable, the corporation may not regain those earnings in the near term regardless of stronger sales across the catalog.