Apple Shares Fall Below $100 Amid China, iPhone Worries
Source: Dow Jones News
Apple Inc. shares fell below $100 for the first time in 15 months, gripped by Thursday's sharp market declines and signs of slowing growth in the two pillars of the company's recent success: the iPhone and China.
The Cupertino, Calif., company's 4.2% drop on the day was greater than the overall market's slide and the 3% slump in the Nasdaq Composite, which closed down 10% from its May peak. Since early December, Apple has shed $100 billion in market value.
Signs of weakness in the iPhone, its best-selling and most profitable product, come after new, larger-screen models propelled Apple to record results in its fiscal year ended Sept. 26. Buoyed by China's rising middle class, Apple's Greater China sales in that period grew 84%, and the company overall posted revenue of $233 billion for the year.
Now, both of those growth engines appear at risk. The Wall Street Journal reported Tuesday that Apple has cut order forecasts to iPhone suppliers in recent months, according to people familiar with the matter. And China's economy is slowing sharply, dramatized by plunging stock markets.
On Thursday, Apple shares lost $4.25 to close at $96.45, down 27% from its July peak of $132.07.
The Apple-share vortex pulled in several of its suppliers. Dialog Semiconductor PLC, which makes power-management chips for Apple, is down 12% on the week. Shares of Catcher Technology Co., a Taiwanese maker of casings for Apple products which warned that it didn't expect sales to grow in the first half of 2016, fell 10% on Thursday.
In part, the larger-screen phones sold so well that they set a high bar for future growth. But new iPhone models that arrived in September lack the type of noticeable changes that prompted consumers to flock to the bigger-screen phones, raising the possibility that Apple could sell fewer iPhones than it did in the previous year for the first time since the iPhone debuted in 2007.
"We're entering the first phone cycle without growth and I think that is now manifesting itself," said Timothy Arcuri, an analyst at Cowen and Co., who downgraded his rating for Apple shares to "market perform" in July on concerns that full-year iPhone sales could decline.
Apple Chief Executive Tim Cook has said iPhone sales should increase in the December quarter compared with a year earlier when it sold nearly 75 million iPhones, but he has declined to offer a projection for the rest of the year.
On Thursday, RBC Capital Markets analyst Amit Daryanani lowered his projection for iPhone sales in the current quarter ending March to 45 million units from an earlier estimate of 54 million units. His forecast implies a 26% decline from a year earlier.
The uncertainty surrounding the iPhone clouds some business strengths. In October, Mr. Cook said Apple is seeing more people switch from handsets running Alphabet Inc.'s Android software and that the majority of its iPhone customers had not upgraded to the bigger-screen models.
"The fact is iPhone is so big and such a dominant portion of the business, if it stumbles, nothing can take its place," said Bernstein Research analyst Toni Sacconaghi.
Last year, Apple introduced Apple Watch, its first all-new product since the iPad. Horace Dediu, an analyst with Asymco, estimates that Apple will sell 21 million watches in its first year. That would make Apple Watch an at least $7 billion business in its first year—an impressive feat for most companies but a tiny fraction of the $155 billion pulled in by the iPhone.
However, sales of the iPad have fallen two straight years. And Apple has struggled to get a highly anticipated streaming TV service off the ground. It is working on an electric car, but that project is years away.
Apple has been here before. In early 2014, the stock plunged after Apple reported weaker-than-expected iPhone sales in its fiscal first quarter. The iPhone 5S was seen as an incremental improvement from its predecessor, prompting concerns that iPhone demand had peaked.
However, Apple shares surged over the next 18 months, making the company the first ever to top $700 billion in market capitalization. Apple is expected to release its next major iPhone update later this year with the iPhone 7.
Adding to the iPhone jitters is the market volatility in China. It passed Europe as Apple's biggest overseas market in the most recent fiscal year and is growing faster than any other region. China accounted for 25% of Apple's sales in the past fiscal year.
When Chinese shares fell sharply in August, Mr. Cook assured investors that its business in China remained strong. In October, he told analysts that Apple's results in China are not dependent on minor changes in growth in the Chinese economy. He also said that based on the number of customers coming into its stores and the sales trends, he wouldn't be able to guess that there was any economic issue at all in China.
Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com
(END) Dow Jones Newswires
January 07, 2016 19:45 ET (00:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Source: Dow Jones News
Apple Inc. shares fell below $100 for the first time in 15 months, gripped by Thursday's sharp market declines and signs of slowing growth in the two pillars of the company's recent success: the iPhone and China.
The Cupertino, Calif., company's 4.2% drop on the day was greater than the overall market's slide and the 3% slump in the Nasdaq Composite, which closed down 10% from its May peak. Since early December, Apple has shed $100 billion in market value.
Signs of weakness in the iPhone, its best-selling and most profitable product, come after new, larger-screen models propelled Apple to record results in its fiscal year ended Sept. 26. Buoyed by China's rising middle class, Apple's Greater China sales in that period grew 84%, and the company overall posted revenue of $233 billion for the year.
Now, both of those growth engines appear at risk. The Wall Street Journal reported Tuesday that Apple has cut order forecasts to iPhone suppliers in recent months, according to people familiar with the matter. And China's economy is slowing sharply, dramatized by plunging stock markets.
On Thursday, Apple shares lost $4.25 to close at $96.45, down 27% from its July peak of $132.07.
The Apple-share vortex pulled in several of its suppliers. Dialog Semiconductor PLC, which makes power-management chips for Apple, is down 12% on the week. Shares of Catcher Technology Co., a Taiwanese maker of casings for Apple products which warned that it didn't expect sales to grow in the first half of 2016, fell 10% on Thursday.
In part, the larger-screen phones sold so well that they set a high bar for future growth. But new iPhone models that arrived in September lack the type of noticeable changes that prompted consumers to flock to the bigger-screen phones, raising the possibility that Apple could sell fewer iPhones than it did in the previous year for the first time since the iPhone debuted in 2007.
"We're entering the first phone cycle without growth and I think that is now manifesting itself," said Timothy Arcuri, an analyst at Cowen and Co., who downgraded his rating for Apple shares to "market perform" in July on concerns that full-year iPhone sales could decline.
Apple Chief Executive Tim Cook has said iPhone sales should increase in the December quarter compared with a year earlier when it sold nearly 75 million iPhones, but he has declined to offer a projection for the rest of the year.
On Thursday, RBC Capital Markets analyst Amit Daryanani lowered his projection for iPhone sales in the current quarter ending March to 45 million units from an earlier estimate of 54 million units. His forecast implies a 26% decline from a year earlier.
The uncertainty surrounding the iPhone clouds some business strengths. In October, Mr. Cook said Apple is seeing more people switch from handsets running Alphabet Inc.'s Android software and that the majority of its iPhone customers had not upgraded to the bigger-screen models.
"The fact is iPhone is so big and such a dominant portion of the business, if it stumbles, nothing can take its place," said Bernstein Research analyst Toni Sacconaghi.
Last year, Apple introduced Apple Watch, its first all-new product since the iPad. Horace Dediu, an analyst with Asymco, estimates that Apple will sell 21 million watches in its first year. That would make Apple Watch an at least $7 billion business in its first year—an impressive feat for most companies but a tiny fraction of the $155 billion pulled in by the iPhone.
However, sales of the iPad have fallen two straight years. And Apple has struggled to get a highly anticipated streaming TV service off the ground. It is working on an electric car, but that project is years away.
Apple has been here before. In early 2014, the stock plunged after Apple reported weaker-than-expected iPhone sales in its fiscal first quarter. The iPhone 5S was seen as an incremental improvement from its predecessor, prompting concerns that iPhone demand had peaked.
However, Apple shares surged over the next 18 months, making the company the first ever to top $700 billion in market capitalization. Apple is expected to release its next major iPhone update later this year with the iPhone 7.
Adding to the iPhone jitters is the market volatility in China. It passed Europe as Apple's biggest overseas market in the most recent fiscal year and is growing faster than any other region. China accounted for 25% of Apple's sales in the past fiscal year.
When Chinese shares fell sharply in August, Mr. Cook assured investors that its business in China remained strong. In October, he told analysts that Apple's results in China are not dependent on minor changes in growth in the Chinese economy. He also said that based on the number of customers coming into its stores and the sales trends, he wouldn't be able to guess that there was any economic issue at all in China.
Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com
(END) Dow Jones Newswires
January 07, 2016 19:45 ET (00:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
