Business Corpus: Apple Bruised By iPhone Sales Collapse, Weak Demand In ChinaApple stock tumbled after the consumer electronics giant warned that holiday-quarter sales would come in well below prior estimates amid weak iPhone demand. Revenue is set to decline. The post Apple Bruised By iPhone Sales Collapse, Weak Demand In China appeared first on Investor's Business Daily.

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Apple stock tumbled on Thursday after the consumer electronics giant warned that holiday-quarter sales would come in well below prior estimates amid weak demand for its iPhones, especially in China. Apple (AAPL) revenue is forecast to decline for the first time since the March quarter in 2016.

On the stock market today, Apple stock plunged 10% to close at 142.19. That's its lowest level since April 2017.

Wall Street analysts responded with a wave of price target cuts. At least three firms downgraded Apple stock to neutral or hold from buy.

Late Wednesday, Apple Chief Executive Tim Cook posted a letter to investors alerting them to a change in guidance for its fiscal first quarter ended Dec. 29. The Cupertino, Calif.-based company now expects revenue of about $84 billion in the period. Two months earlier, it predicted sales of $89 billion to $93 billion, or $91 billion at the midpoint.

In its fiscal first quarter a year ago, Apple generated sales of $88.3 billion. Its revised guidance would translate to a year-over-year sales decline of 4.9%.

Apple's guidance suggests earnings per share of $4.36 for the December quarter. Wall Street was modeling $4.53. In the year-ago quarter, it earned $3.89 a share.

Apple is scheduled to report its fiscal first-quarter results on Jan. 29.

Fewer iPhone Upgrades Last Quarter

Cook blamed the revenue decline on lower-than-expected iPhone sales, mostly in China. Apple also saw fewer customers upgrading to new iPhones, as many people took advantage of a low-cost battery replacement option to revitalize their existing handsets, he said. That $29 battery replacement program ended Dec. 31.

Loop Capital analyst Ananda Baruah downgraded Apple stock to hold from buy with a price target of 160.

"The company's negative preannouncement greatly reduces the visibility on the trajectory of revenue over the intermediate term (and perhaps for much of calendar 2019)," Baruah said in a report to clients. "It also again calls valuation into question."

Jefferies analyst Timothy O'Shea lowered his rating on Apple stock to hold from buy. He also slashed his price target to 160 from 225.

Apple 'Navigating Uncharted Waters'

Apple hasn't missed its guidance in years, "so the extent of this miss suggests it is navigating uncharted waters," O'Shea said in his note to clients. "We move to the sidelines and wait for clarity as uncertainty grows around the hardware business."

Apple's iPhone woes could continue until midyear, Nomura Instinet analyst Jeffrey Kvaal said in a report.

"Despite Apple's production cuts through fiscal Q1, we assume excess channel inventory will weigh on Apple's (iPhone) shipments into mid-2019," he said. Kvaal reiterated his neutral rating on Apple stock and cut his price target to 175 from 185.

Analysts Blame High iPhone Prices

Bernstein analyst Toni Sacconaghi said Apple's sluggish iPhone sales could be related to their high prices.

"Apple failed to acknowledge the possibility that current iPhone prices are simply too high (stunningly, we note that iPhones prices are nearly 5x higher than the average non-Apple smartphone sold globally)," he said in a note.

Sacconaghi kept his market perform rating on Apple stock, but lowered his price target to 160 from 210.

FBN Securities analyst Shebly Seyrafi said Apple overlooked several factors in the iPhone sales weakness. They include market share loss in China and overpriced smartphones.

Apple has been losing market share in China to domestic smartphone makers such as Huawei, Oppo, Vivo and Xiaomi. Those firms have gained thanks to lower-priced handsets and rising nationalism in China, Seyrafi said.

"We believe that Chinese consumers may be getting irritated by recent trade battles initiated by the Trump administration and are deciding to buy from local manufacturers," Seyrafi said.

Seyrafi maintained his outperform rating on Apple stock, but lowered his price target to 190 from 240.

Chip Stocks Smacked By Apple's Lowered Guidance

Apple's negative preannouncement knocked down a host of companies that supply chips and other components for the iPhone.

Broadcom (AVGO) dropped 8.9% on Thursday. Cirrus Logic (CRUS) slid 8.5%. Lumentum Holdings (LITE) tanked 8.4%. Skyworks Solutions (SWKS) crumbled 10.7%. Qorvo (QRVO) fell 9.1%.

Other component suppliers laid low included Synaptics (SYNA), down 6.7%; Taiwan Semiconductor Manufacturing (TSM), down 5.9%; and Universal Display (OLED), down 13%.

Many Apple suppliers already guided to weaker-than-expected sales and earnings for the fourth quarter when they posted third-quarter results.

The post Apple Bruised By iPhone Sales Collapse, Weak Demand In China appeared first on Investor's Business Daily.