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Hold on to your Apple stock, this storm shall pass

Apple Inc. (AAPL) was said to have slashed its iPhone production target for the first quarter of 2019 by 10%, which did not come as a good sign. According to a report by Nikkei Asian Review, the total production volume of old and new iPhones will now be 40 million to 43 million units as opposed to the previous range of 47 million to 48 million units.

Apple stock
(Image Courtesy: thiago japyassu/Unsplash)

This revised target, which includes all the new iPhone models, reflects a 20% reduction from the same period last year when over 52 million units were sold. Apple reportedly informed its suppliers of the reduced target late last month, marking the second time in two months that iPhone production levels were cut.

Some of Apple’s component suppliers recorded revenue declines, as expected, last quarter while others have cut their forecasts for the coming quarter as well. They believe market conditions will continue to be challenging during 2019.

Apple is said to be suffering from the effects of the trade war with China as well as saturation in the global smartphone market. However, in an interview with CNBC, Apple’s CEO Tim Cook has dismissed claims that iPhone sales are falling. The Apple chief also said the company has plans to introduce new services, particularly in the healthcare space.

While there are so many pessimistic reports about Apple’s future, some analysts continue to be optimistic on the company’s potential. Firstly, Apple is doing well in its businesses outside the iPhone, particularly services and wearables. Last quarter, services revenue grew 17% year-over-year and reached a record level of $10 billion. Services was the second largest contributor to total revenue after the iPhone.

Apple Q4 results beat estimates; stock falls on weak iPhone sales, guidance

These businesses are providing good support to Apple’s growth plans and the company’s latest disclosure of its upcoming services signal positive developments in the near future. When it comes to the US-China trade war, Apple has always expressed optimism that things will take a turn for the better and that the current challenges are temporary.

Some market experts share this view as well. They believe that the trade tensions will eventually dissipate and that the economic and business conditions in both countries will improve, which in turn will benefit Apple by boosting its revenue.

Despite the temporary setbacks, Apple can be expected to pick up in the coming months. The majority of analysts have kept their ratings at a Strong Buy or Hold while none have rated it as Sell. As of 3:10 pm ET, Apple’s stock was up 2.2%.

 

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