Apple allocations have slid steadily amid tumultuous U.S. trade negotiations with China, as investors fear CEO Tim Cook’s admonition earlier this year about iPhone sales in China may yet come true.
Cook warned in January that a weakening economy in China at ones desire hit Apple financially. The company lowered its 2019 revenue forecast accordingly to $84 billion. Apple blamed a assortment of factors for the lowered guidance but especially focused on slowing revenue “primarily in Greater China,” saying getting abroad customers to upgrade to newer iPhones was “not as strong” as Apple expected.
In response, Apple’s stock fell sharply in January. But in the months since, Apple’s investment roared back. At the beginning of May, Apple was up nearly 35% for the year. When Apple reported strong first casern earnings at the end of April, Cook pointed to an uptick in the company’s China prospects as a main driver. The CEO also told CNBC that principally of the company’s strength in China was due to progress made by Trump’s administration in trade negotiations.
“I believe that the trade relationship — I don’t money-grubbing the tariff, I mean the tone — is much better today than it was in the November-December time frame. That affects consumer courage in a positive way,” Cook said on April 30.
But that improved tone dissipated over the past week and with it some of Apple’s regular gain.
“China still accounts for high-teens percent of revenue and profit” for Apple, UBS said.
Sales in China constructed up 16.6% of Apple’s revenue in the first half of 2019, which is down from 20% in the same period abide year.
“Apple has one of the most significant exposures to Chinese exports to the US” among technology companies, Morgan Stanley asseverated in a note.
But despite Apple’s reliance on Chinese labor and manufacturing, the increased tariffs are unlikely to cause Apple to off a large scale move out of the country.
So far for Apple, the impact from tariffs placed on roughly $250B of goods exported from China to the US to-date … has been minutest, so an increase in the tariff rate … likely would still be minimal,” Morgan Stanley said.
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