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Apple warned Thursday that sales for the crucial holiday quarter would likely be out of line with Wall Street expectations, which Chief Executive Officer Tim Cook blamed on emerging market weakness and foreign exchange costs.
The disappointing predictions of the world's most valuable technology company have helped reduce the number of stocks by 7%, reducing Apple's market value by about $ 70 billion and pushing it below the bar $ 1 trillion (about 73 billion rupees). The forecast could also worsen the concerns of tech companies that have experienced a massive sell-off after the misfires of Amazon.com and Google's parent company, Alphabet.
Apple has announced revenues between $ 89 billion and $ 93 billion for the first quarter of its fiscal year ended in December, with a midpoint of $ 91 billion lower than the expectations of $ 93 billion from Wall Street, according to data IBES of Refinitiv.
In an interview with Reuters, Cook said Apple "saw macroeconomic weakness in some emerging markets." During a conference call, he then explained to investors that Brazil, India, Russia and Turkey were among the weak markets. Sales were stable in the fourth quarter in India, Cook said.
"Obviously, we would like to see this growth be huge," Cook said.
Leaders also announced they would stop giving out the number of iPhones, iPads and Mac computers, which would lead to a further decline in share price as iPhone unit sales have long been key indicator of quarterly success.
By retaining this number, it will be impossible to calculate the average selling price of phones, another key measure.
Apple executives said unit sales are becoming less relevant as customers buy bundled products that include subscription services like Apple Music.
Apple announced that it would begin to provide data on the cost of sales of its service business, an important measure for subscription companies. But investors reacted negatively.
"Companies usually stop reporting their results as soon as they are about to transform.It's not a good idea for Apple," said BTIG Research analyst Walter Piecyk.
For the quarter ended September, Apple generated revenue of $ 62.9 billion and earnings of $ 2.91 per share, exceeding expectations of $ 61.5 billion and $ 2.79, respectively.
According to FactSet, Apple sold 46.9 million iPhones in the fourth quarter of the year, missing analysts' forecasts, which would amount to 47.5 million. But the average selling price of iPhones was $ 793, well above analysts' estimates of $ 750.78, according to FactSet.
"We are concerned that Apple's pricing power is limited," said George Salmon, an analyst at Hargreaves Lansdown. "The group now charges almost $ 800 over the phone, and while this is contributing to higher revenues despite stagnant sales volumes, it is worth asking how the strategy of pushing up prices from the price scale to slowdowns could put bettors off. "
In an interview with Reuters, Cook said his warning about holiday sales was partly based on Apple's earlier than normal launch of its high-end iPhone models, the XS and XS Max.
Mr. Cook also said that the exchange rate would have a negative impact of $ 2 billion on Apple's sales forecast.
Apple was not sure it could create enough new models of iPhones, Apple Watches, iPads and Macs released in recent weeks, Cook told Reuters. Apple is broadly expanding the use of its facial recognition unlocking system in iPhones and iPads, which uses special lasers produced by a handful of vendors only.
Chaim Siegel, an analyst at Elazar Advisors, said the problems of trading with China could make it difficult for Apple to get the supplies it needs. "Regarding the slowdown in emerging markets, it is also a contagion from China.The two problems of trade war come true," he said.
But Cook said Apple was pleased with its performance in China, where revenue grew 16 percent to $ 11.4 billion, the fifth consecutive quarter of double-digit growth in the region.
Apple's cautious forecasts could accelerate investors' fears, which in turn erased gains from the stock market for a good part of the year. Thursday, at the close of the market, Apple's shares had risen by more than 25% – thanks to Warren Buffett's purchases and a $ 100 billion share buyback program – while the composite index Nasdaq was almost stable for the year.
Apple said revenue from services, including iCloud, the App Store and Apple Music, reached $ 10 billion, according to analysts' estimates. Apple's investors are increasingly focusing on the growth of the company's service business as consumer markets are saturated with smartphones.
Apple expects a tax rate of 16.5% for the December quarter, exceeding analysts' expectations by 15.9%, according to Refinitiv's IBES data.
For the 2018 fiscal year ended in September, Apple recorded a business turnover of $ 265.6 billion and earnings of $ 11.91 per share, exceeding analysts' estimates of $ 264 billion and $ 11.79 per share.
© Thomson Reuters 2018
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