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Well, it did not take a lot of time. Recently, the technology giant Apple (AAPL) has gained momentum after the company's recent earnings report, surpassing the $ 215 of good news. However, as the chart below shows, equities have now lost all of these gains, and some have fallen by $ 30 from their recent peak. The culprit is essentially the same who caused the fall in late 2018 and early 2019: the trade war between the United States and China is back.
(Source: Yahoo Finance)
With the Dow Jones Industrial Average down more than 700 points on Monday afternoon, Apple stocks have lost about 6%, making it one of the worst days of their unrelated profit history. Part of the carnage may have been accompanied by a few technical sales, as stocks fell below the 50-day moving average this morning to over $ 194 a share.
Last week, the United States announced its intention to take action. China has retaliated today with its news. Chinese consumers reduced Apple's purchases at the end of last year, which explains in part the significant shortfall of Apple, which has dropped the stock of about $ 90 in just a few months. Last week, a respected Morgan Stanley Street Analyst released the following note regarding the trade war and its potential impact on Apple:
China's confidence could drop its EPS by about 23%, or $ 3, during the worst-case scenario, estimates a team of Morgan Stanley analysts led by Katy Huberty.
Apple is expected to raise the price of the iPhone XS by $ 160 to pass the costs on to the consumer, which could further strain demand and lengthen the upgrade cycle.
The good news at the moment is perhaps that the street analysts have not rushed yet about the forecasts published in the second quarter report. Currently, the street is just above the median business figure announced by Apple, leaving a little room for Chinese sweetness. I would be much more worried if the street was at the highest level or even above the guidance range of Apple, as this would increase the chances of the company disappearing for the second time in just three quarters. . You have to ask how much the management of the impact of the trade war is built into the quarterly forecast, because we are not in the middle of the quarter yet.
While the real impact of the trade war will not be known for some time, an element is quite visible at the present time. As you can see in the graph below, the US dollar has jumped about 3% from its recent low against the Chinese yuan. A stronger greenback will have a negative impact on Apple's earnings on its second largest market. If the company has hedges, it will recover some of these losses later in the income statement, but exchange rates have provided a backdrop to Apple in recent years.
(Source: cnbc.com)
As the trade war with China resumed, the tech giant Apple was one of the biggest losers on the street recently, losing again its first place in the market capitalization. Investors are concerned about the company's second largest market, and a stronger dollar will create a secondary wind. Those looking for a higher dividend yield and a buyback program from Apple will be happy, but it's pretty disappointing to see the rise in profits disappear and then again in a few weeks.
Disclosure: I / we have / we have no position in the actions mentioned, and we do not intend to initiate a position within the next 72 hours. I have written this article myself and it expresses my own opinions. I do not receive compensation for this (other than Seeking Alpha). I do not have any business relationship with a company whose shares are mentioned in this article.
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