Home Guest Forager Funds Apple shares plunge as trade war takes toll

Apple shares plunge as trade war takes toll

Chinese consumers turn backs on US companies.

Azal Khan

Digital Journalist, Your Money

Apple shares have fallen sharply on Wednesday after the tech giant cut revenue forecasts to below expected levels.

The tech giant announced a revised forecast of US $84 billion, down from the US $89 to $93 billion it had previously projected. 

In a letter to investors, Apple CEO Tim Cook cited “lower than anticipated iPhone revenue, primarily in Greater China,” but also said that upgrades to new iPhone models in other countries were “not as strong as we thought they would be.”

The revelation saw shares in the Nasdaq-listed company fall by a substantial eight per cent.

Steve Johnson, chief investment officer at Forager Funds, cited Chinese trade war fears as a driving factor when speaking to Business Breakfast.

Glass entrance to the Apple Store at Nanjing Road, Shanghai. (iStock.com/Nikada)

“The slowdown is also playing into fears about Chinese retaliation to some of Trump’s trade war rhetoric,” Johnson said.

“I’ve got a good friend who works over there and the push to not buy some of these marquee US brands is very strong.”

“And it’s not just the government telling people to do that, there’s a fairly strong groundswell among the population to follow suit and do the same.

Johnson said the iPhone is simply too expensive and that is also impacting demand levels, with some phones selling for $1600-$2000.

“They’ve tried to offset stable or falling prices with higher and higher prices of its units.”

The need to constantly reinvent themselves has created a problem for Apple, Johnson said.

“This highlights the risk of a business that is undoubtedly one of the world greatest brands. But they have to constantly create new products. The business is only as good as its more recent year of sales.”

“This business makes more than half of the smartphone profits in the whole world despite selling 15 per cent of the phones.”

“It is absurdly profitable in terms of the margins they are making on the hardware,” he said.

There have been several reports pointing to weak iPhone sales in recent months. One of Apple’s suppliers cut their estimates last quarter, leading many to speculate that people won’t be buying an iPhone this year.

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