Apple stock plummets 8% on news of grim Q1 2019 outlook

Apple's board of directors named Tim Cook as the company's chief executive officer in 2011

Apple's board of directors named Tim Cook as the company's chief executive officer in 2011

"This is probably one of the hardest things Tim Cook has had to do as CEO, putting out that letter today", Michael Gartenberg, a former Apple marketing executive, told Bloomberg after the release of yesterday's letter. Cook states that the "magnitude of the economic deceleration" in Greater China took Apple by surprise, resulting in much of its revenue decline. "In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad". US stocks have tumbled over the last three months as investors anxious that the economy might slow down dramatically because of a variety of challenges including the trade dispute and rising interest rates.

Shares of US -based Apple suppliers and chipmakers including Cirrus Logic Inc, Skyworks Solutions Inc, Analog Devices, Broadcom Inc, NXP Semiconductors NV and Micron Technology Inc all tumbled.

The unusual move came on a day when it was reported that factory activity in China contracted for the first time in 19 months in December. This is despite the fact that Huawei's offerings are nearly entirely locked out of the world's third-largest smartphone market, the US. "Based on our best estimates of how these would play out, we predicted that we would report slight revenue growth year-over-year for the quarter", Cook wrote in a long-winded letter to investors.

Analysts also highlighted that Apple was vulnerable to the effects of the US-China trade spat, in part due to risk that the tensions could cause Chinese buyers to sour towards US brands. And market data has shown that the contraction in Greater China's smartphone market has been particularly sharp.

South Korea's Kospi added 0.8 per cent. Japan's Nikkei 225 index fell 2.3 per cent on its first day of trading in 2019 as technology and electronics makers slumped on Apple's report that Chinese iPhone sales were slipping.

Apple's decision to cut its sales outlook, "isn't a huge shock at this point", said Shannon Cross of Cross Research.

Apple said it now expects revenue of around $84bn, down from an earlier estimate of between $89bn and $93bn.

The analyst points out how Nokia "became reliant" on customer upgrades years after its' Symbian-powered flagships like the E62 and N900 had "saturated the market".

Apple endured a bumpy 2018.

Apple shares skidded 7.7 percent in after-hours trade, dragging the company's market value below $700 billion.

Apple's poor performance was echoed by its fello Faang companies - Facebook, Apple, Amazon, Netflix and Google - which all performed poorly in 2018.

Rupal Bhansali, chief investment officer of Ariel International and Ariel Global, and Rajiv Jain, head of GQG Partners, which invests in global and emerging market stocks, are among the veteran investors who have been warning of potential trouble for Apple for months.

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