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Apple’s warning keeps pressure on stocks

Apple is not a canary in coal mine, the markets are well aware of the global growth slowdown in China. The timing of the news from Apple is somewhat disturbing. The signs were there regarding smartphone buying trends in China, softer Chinese economic data and the strength of the US dollar. Many analysts see the revenue cut, which was the first cut in 15 years, implying a 12 million unit miss and that should have been clearly telegraphed earlier.

Apple is down $15.60, lower by 9.9%, which is the biggest fall since 2013.  The Apple warning drove US stocks lower by over 2%, the 10-year Treasury  fell 4.6bps to 2.576% which was an 11-month low.

Whether or not this recent decline with Apple will deter long-term investors is still debatable. iPhone growth is decelerating, but other parts of the business is performing well. Apple’s services have been a positive spot of the past few years, averaging 26% annual growth since 2014. The company is still generating $65 billion in free cash flow with a strong yield of 10%. The other key area of focus is the company buyback program. Apple will still have a good earnings per share next quarter because the company continues to exercise its share repurchases. Apple has returned $239 billion to stockholders, they average buying back $20 billion shares a year and have reduced the shares of outstanding shares close to 30%.

Some are comparing Apple to Nokia and are calling to oust CEO Tim Cook. The start of the year is a bad one for Apple and their suppliers, but if we see growth stabilize in China and the dollar weaken, we could see Apple stabilize this year.

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Ed Moya

Ed Moya [5]

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya