INTERNATIONAL – Apple forecast cut wasn’t a surprise to those investors that heeded advice from analysts and short-sellers who raised red flags as early as last summer, just as the iPhone maker’s valuation surpassed the $1 trillion mark.
New Street Research’s Pierre Ferragu stepped out as the lone wolf in late August to warn investors of a looming “air pocket” in demand. He cut his rating on the stock to sell, predicting “material disappointment” in 2019. That call was vindicated on Thursday as the shares plunged 10 percent in their worst drop in almost six years.
Goldman Sach’s Rod Hall in October said Apple was showing signs of “rapidly slowing” consumer traction in China ahead of its fiscal fourth-quarter earnings report.
Apple’s heavy reliance on increasing the average selling price of its iPhone units in an effort to offset slowing demand eventually prompted Guggenheim to downgrade the stock to the equivalent of a hold rating. In November, the firm concluded the tactic was "no longer enough" to sustain growth.
In December, Rosenblatt Securities hinted to clients that the tech giant would cut iPhone production by 4 million units.
Analyst Jun Zhang anticipated the cut would come from the work of Chinese companies said to have begun subsidizing employees for buying Huawei devices after Chief Financial Officer Meng Wanzhou was arrested at the behest of the US.
Dan Niles, a hedge fund manager at AlphaOne Capital, said his short case was bolstered when the company said Nov. 1 it would stop reporting unit sales for iPhones, iPads, and Macs beginning in fiscal 2019.
He said in a Bloomberg Television interview on Thursday that many of Apple’s problems were self-inflicted, including iPhones that are too expensive for emerging markets.Bloomberg