If you are not familiar with earnings announcements, you may not see the significance in Apple’s recent press release.Most Large Cap companies will give guidance to investors by providing expectations of the upcoming quarter on earnings calls done quarterly. It is common practice to give investors insights as to what has happened in the previous quarter and what the company leadership is expecting in the quarter to come.
It was a surprise on wall street when CEO, Time Cook, of Apple did a press release to investors the 1st trading day of 2019 warning that this quarter will not be as positive as expected. The official earnings announcement date has not been revealed yet but is expected the 1st week in February based off previous years. The surprise sent a shock to investors, and Apple shares dropped over 7%.
With a company the size of Apple seeing slowing sales in what was once the fastest growing consumer market (China) has even Apple concerned. The reasons for slowing Apple iPhone sales in China could be for many reasons, i.e., current trade negotiations being handled by the Trump administration, the increase in the US Dollar value, lack of innovation, etc.
There are many complexities when selling overseas with cultural changes, currency exchange rates, political tensions, foreign competition, foreign laws, taxation/tariffs, etc. Although if consumers are starting to tighten up their spending and are deciding that it is okay to keep your old technology a little longer than that could be a bad sign for businesses.
Warren Buffet has been cited saying “Apple has an extraordinary consumer franchise,” he said. “I see how strong that ecosystem is, to an extraordinary degree. … You are very, very, very locked in, at least psychologically and mentally, to the product you are using. [IPhone] is a very sticky product.” We similarly see many technologies have started to become a need instead of a want over the years.
Should you be concerned with Apple sales slowing overseas?
Short Answer… not if your investments have been tailored to fit your needs.