Apple Stock Price Plunges After Earnings Warning

Apple Stock Price Plunges After Earnings Warning

San Francisco- Following weaker than expected iPhone sales, particularly in China, Apple has lowered its revenue guidance for fiscal 2019 first quarter, which ended on December 29.

China was highlighted as a particular pain point for Apple's first quarter results, with Cook adding that revenue in China accounts for "over 100 percent of our year-over-year worldwide revenue decline".

So far, we haven't heard anything as to what Apple plans to do in order to bounce back from this unexpected hit.

The reckoning came in the form of a warning that Apple CEO Tim Cook delivered to the company's shareholders in a letter released after the stock market closed Wednesday.

China is now experiencing an economic slowdown, with GDP growth expected to hit 6.5 percent for the year, the lowest growth rate since 1990.

Along with macroeconomic challenges, he wrote, "we believe there are other factors broadly impacting our iPhone performance".

"The question for investors will be the extent to which Apple's aggressive pricing has exacerbated this situation and what this means for the company's longer-term pricing power within its iPhone franchise", James Cordwell, an analyst at Atlantic Equities, told Reuters. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed.

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Both firms are checking in on whether Apple failed to inform investors regarding slowing iPhone demand, especially in China, which is the largest smartphone market in terms of volume.

CEO Tim Cook blamed the slump on a slowing economy in China, where Apple has also faced competition from Huawei and Xiaomi.

On the other hand, Cook also stressed that Apple showed considerable strengths in other areas (particularly in its cash assets: the company is now sitting on about $130 billion).

Now Apple estimates its gross margin for the quarter to be about 38%, with operating expenses coming to about US$8.7 billion.

Cook also said in the letter that fewer carrier subsidies, price increases based on the strength of the USA dollar and cheaper battery replacements caused the weak iPhone upgrades for the quarter.

"Despite these challenges, we believe that our business in China has a bright future". Price rises in some countries have put off consumers, and iPhone owners have refused to upgrade, partly because of Apple cutting the price of replacement batteries that have extended the life of their older phones.

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