After sowing chaos in global markets - triggering a flash crash in several AsiaPac currency pairs and a broad-based selloff in Asian indexes - by cutting its quarterly revenue guidance for the first time in 16 years, Apple is watching its shares on Thursday morning disintegrate, erasing a rally that briefly drove its market capitalization near $1.1 trillion over the summer. In a move that portends a disastrous open for US indexes, Apple shares dropped 9.3% during premarket trading to $143.25, their lowest level since July 2017. The stock is now down 37% from its all time high of $232.07 hit on October 3, and the rate of descent now approaching that of cryptocurrencies.
Apple shares were halted in late-day trading on Wednesday after Tim Cook warned investors that Apple was slashing its Q1 revenue guidance, saying "our revenue will be lower than our original guidance for the quarter" and blaming it all on iPhone sales in China, i.e., "lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline." Cook delivered the unwelcome news just a few months after the company sparked a mini-panic by informing investors that it would no longer break out iPhone sales - one of the company's most heavily scrutinized sales metrics.
The pain would not be limited to Apple however, which has seen a barrage of sellside downgrades on the news: Raymond James has warned that faltering iPhone sales will filter through to Apple's suppliers, which have also been hurt by the selloff, per Bloomberg:
All component suppliers are likely to be hurt by Apple Inc.’s "significant miss," and face "a cascade of downward revisions as this news is digested," Raymond James’s Chris Caso wrote in a note. Caso reduced his models for Apple, Broadcom Inc., Qorvo Inc. and Skyworks Solutions Inc.
Skyworks shares are down 6 percent in pre-market trading; Broadcom’s are falling 2 percent, while Apple tumbles 8.9 percent.
Raymond James’s updated expectations for iPhone unit shipments flow through to all supplier models, Caso said, and he assumes Apple hasn’t yet made cuts to suppliers, as the firm waited to announce results publicly before supplier cuts last quarter. He didn’t assess the possibility Apple will choose to "end-of-life" one or more iPhone models - as the company did with the iPhone X last year = which would trigger an even sharper production drop.
No matter how much wealth is wiped out as the world realizes that Apple's strategy to lose market share but raise average selling prices - as the world heads into a recession - was idiotic, we're confident that Warren Buffett, whose Berkshire Hathaway has been loading up on Apple stock over the past 18 months, will repeat that the Apple wipeout amounts to the "sale of a lifetime" and justify snapping up more shares at a "discount". Absent that of course, Apple can just burn a few hundred billions more on buybacks - after all the company has already lost $14 billion (and rising) on the stock it repurchased in 2018.