Apple (AAPL) stock has fallen to a new yearly low of $146.59 on Monday as trade tensions between the US and China is hurting the tech giant. The stock crash has created a buying opportunity but investors are cautious as the most obvious near-term concern remained the weaker-than-expected iPhone sales. Let’s take a look at the five headwinds that will hurt the company’s stock.
The shortfall in iPhone sales
After venturing into the premium smartphone segment, the company has faced with a shortfall in the iPhone sales in the near-term. Many analysts and investment firms lowered their expectations after reports surfaced that Apple’s suppliers are facing demand crunch.
The most recent earnings report stated that the management’s expectations for iPhone shipments fell short of consensus estimates. Apple should be looking out for regaining the sales growth and attracting the people at large with their new products.
The shift in Chinese demand
For the past few months, Apple investors were concerned about the trade conflict. The trade battle has prompted Chinese companies to start offering subsidies to their employees who choose local products instead of iPhones. This could hurt Apple as the country is the company’s third largest market.
Already, people started opting for other Chinese smartphones that offer the similar or better features than the latest iPhone XS Max. With the shortfall likely to hurt the company’s results, investors remained concerned about the value of the stock and the impact on the stock during the next year.
Shortage of iTunes App Store revenue
Majority of the app makers including Netflix (NFLX), Spotify (SPOT), and others have prevented their customers from using iTunes to pay their subscriptions. The companies, in turn, are collecting the subscriptions directly and this will result in Apple not getting the fees charged on all Tunes payments.
The result could hurt the revenue coming from App Store, which represented about a third of its Services revenue. This could impact the overall revenue and the iTunes high margins could drag the bottom line down more significantly than the present. Services revenue is, more importantly, the company’s growth engine and the App Store could take a hit if more apps circumvent it, thereby lowering the total revenue.
Ambitions in the car space
Apple’s dream of making large in the car space took a turn after the hiring of Tesla (TSLA) designer Andrew Kim. This has sparked the renewal of Apple’s interest in whether the tech giant wants to build a car. Apple has been focusing on car software and self-driving technology.
Meanwhile, few analysts have pointed out that a combination of Apple and Tesla could make sense as it would be a win-win deal. Tesla is badly in need of some financial assistance as it struggles to meet its production goals amidst steady cash burn. If such a merger happens, Apple could fund Tesla’s losses for years and resolve its cash-burn challenges. As a quid pro quo, Tesla could open up a high-growth market to Apple.
Apple could shed out cash from its treasury if the tech giant opted for building itself in the car space or purchasing an automotive player for establishing itself to fulfill its dream. In the short-term, the stock could take a hit if there is a shortage in the cash flow as this ambitions could yield return only in the long-term.
International markets headwinds
Apple has been facing with headwinds in the international markets that are much greater than those assumed by the market. In the international market, Apple fell to the third place behind Huawei in the smartphone market share, according to the latest reports from Gartner and IDC.
The top smartphone brands are seeing overall market share growths. Due to this, Apple will face headwinds in increasing market share in emerging markets. In emerging markets, the tech giant is seeing pressure due to currency weakness. The tech giant is expected to resolve these headwinds in order to get growth in the international market.