Why Did Apple (AAPL) Stock Fall Again?
Zacks Investment Research | Dec 10, 2018 12:35AM ET
Shares of Apple (NASDAQ:AAPL) dipped once again Monday morning after Citi analysts cut their Apple price target amid increased worries about the iPhone giant’s future. Plus, a Chinese court’s ruling in favor of Qualcomm (NASDAQ:QCOM) could spell trouble for Apple.
Price Target (NYSE:TGT)
Citi lowed its Apple price target from $240 a share to $200 per share, citing Chinese uncertainty, among other concerns. On the bear side, the firm sees Apple stock tumbling to as low as $125 per share if the tech powerhouse’s revenue growth slows to 2% to 3% a year, along with weaker-than-expected gross margins.
The company does not think Apple will miss its current quarter revenue estimates and said that legacy iPhone sales are up due to the price reduction. “We do not expect China to ban or impose additional tariffs on Apple,” Citi analysts wrote in a note to clients. “However, we note that should this occur Apple has material exposure to China."
Chinese Court
Along with the Citi price cut, Apple was hit with a potentially devastating court ruling in China. A Chinese court ordered Apple to stop selling older iPhone models in the world’s second-largest economy after it concluded that the company infringed on two Qualcomm patents. The company’s newest phones are reportedly safe at the moment, according to .
It is not clear when exactly this new iPhone ban in China will take effect. But investors should note that Apple plans to appeal the decision, and the company said all iPhone models would remain available in China. The lawsuit is also part of a larger legal battle between Qualcomm and Apple in China. Plus, the ruling comes as the trade dispute between the U.S. and China continues.
Clearly, it seems that we are at the preliminary stages of the Chinese court ruling, and we are unsure exactly what will happen. It is, however, worth remembering that China is a major market and is expected to play a significant role in Apple’s future. Last quarter, Greater China accounted for roughly 18% of Apple’s totally quarterly revenues.
Price Movement
Shares of Apple dipped 2.15% through mid-morning trading Monday to hit $164.87 per share on the back of Citi’s new price target and the Chinese court news. At this point, investors are likely wondering when Apple’s current fall from grace might end since AAPL stock is now in the red for the year.
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Apple stock has fallen over 26% in the last three months as part of a larger market pullback that has seen its fellow FAANG giants, Facebook (NASDAQ:FB) , Amazon (NASDAQ:AMZN) , Netflix (NASDAQ:NFLX) and Google-parent Alphabet (NASDAQ:GOOGL) —face tougher times as well.
Bottom Line
Investors have been worried about Apple since the company announced its fiscal fourth quarter earnings results on November 1 and shocked Wall Street when it said it would no longer provide iPhone unit sales figures. The tech titan has slowly tried to bolster its business beyond its flagship smartphone through its services sector.
And let’s not forget that Apple is expected to launch its own stand-alone streaming TV service in the hopes to take on Netflix and soon enough Disney (NYSE:DIS) and AT&T (NYSE:T) . But investors are likely worried that Apple’s days of impressive revenue growth are over for now, with our current Zacks Consensus Estimate calling for the firm’s current fiscal year revenue to climb just 4.9%.
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