Displaying items by tag: Apple
In what comes as an almost apocalyptic announcement for Apple investors, President Trump indicated yesterday that he may impose a tariff directly on iPhones. When asked about whether he would do so, Trump said “Maybe. Maybe. Depends on what the rate is … I mean, I can make it 10%, and people could stand that very easily”. One analyst summarized the development this way, saying “The Street will not be taking this news lightly as with the litany of bad news Apple (and its investors) have seen over the last month … this tariff threat on iPhones out of left field from Trump and Beltway will surely add to this white-knuckle period for Apple”.
FINSUM: We don’t think this will happen. If Trump tried to raise iPhone prices 10% he would likely have a popular revolt (from both sides of the aisle) on his hands. He certainly doesn’t want that.
Apple’s CEO Tim Cook went on the record yesterday telling the market that he feels pending regulation of the tech sector is inevitable. Cook has been a recently strong critic of the data abuses exhibited in the sector. He argued that the free market is not doing its job to protect privacy and that governmental action is necessary. In cook’s own words, “Generally speaking, I am not a big fan of regulation … I’m a big believer in the free market. But we have to admit when the free market is not working. And it hasn’t worked here. I think it’s inevitable that there will be some level of regulation . . . I think Congress and the administration at some point will pass something.
FINSUM: We have to agree with Cook about the likelihood of regulation here. The financial incentives for companies are not aligned with protecting privacy, so the government would likely need to step in to make that happen.
We have covered a lot of bear market indicators this year. Every investor is understandably wondering when the next bear might bite. So how about this for an indicator—Apple just entered a bear market. Now we know that Apple’s decline seems to be quite particular to its own situation—especially the fear over iPhone sales that were cemented by the company’s announcement that it will stop reporting such figures—but what if it is a leading indicator for the whole market? Apple is not alone among big companies either—over 40% of the S&P 500 was in its own bear market at the October low in equities.
FINSUM: We do not think Apple’s bear market in its self signifies much about the underlying market. Apple’s trouble really stems from one issue—one of the most successful products in history is finally starting to see slower growth as the result of its own spectacular success. We do not think that is a bear market indicator.
The market fell in a big way yesterday. The root cause? Apple. Apple has cut its iPhone sales guidance, and it now seems a recession is coming to the whole Apple universe. The numerous companies that make their living supplying Apple seem set for a severe correction and are paring their estimates back sharply. Investors didn’t seem ready for this slowdown in the iPhone, perhaps misguided by the hype that has recently surrounded new models. The fact is that the iPhone is now a mature product, and maintaining the kind of growth it once had is likely untenable, a fact that even Wall Street analysts are starting to admit.
FINSUM: Apple’s business is changing and it seems to be doing a good job managing that transition, though everyone hopes it will have a new dynamite product. That said, a general recession surrounding the iPhone universe seems likely.
Apple’s stock got hit in a big way last week as the company announced it would no longer announce unit sales of iPhones. The announcement was taken as a sign of weakening iPhone demand. An analyst summed it up this way, saying “Apple Reduces Disclosure; Typically Not a Good Sign”. The stock has fallen 10% since the announcement. The more positive view is that Apple wants investors to focus more on its earnings than on its unit sales, as earnings are ultimately what will drive the shares forward.
FINSUM: Apple’s shares often fall on earnings (8 out of the last 15 times), so the company has little to lose by eliminating unit sales. We think this is a smart move, especially as the iPhone transitions to being a highly saturated and mature product.