2019 did not start on a happy note for Apple Inc. (AAPL). On Wednesday the company lowered its revenue guidance for the first quarter of 2019 by 7% to $84 billion from its previous range of $89 billion to $93 billion.
Apple blamed the guidance cut on challenges faced in emerging markets, mainly Greater China. The company said iPhone revenue was not on par with expectations in China while iPhone upgrades came in lower than expected in some developed markets. It appears as though the iPhone-maker’s challenges are likely to continue.
According to a report by Business Insider, Apple might have to face a lawsuit for misleading investors on its China business. New York law firm Bernstein Liebhard believes that Apple did not warn its investors on the falling demand for iPhones in China.
In November, CEO Tim Cook said the company was doing well in China and that the iPhone saw good growth in the region. The law firm also said that Apple failed to mention that the trade dispute between the US and China was hurting its business.
Apple has been facing a number of challenges for a while now, including tough competition in China from local players. The American company is said to have lost market share to its Chinese rivals. Moreover, Apple has not made any new product introductions in quite some time and the company also lacks meaningful innovation.
Apple’s features are sometimes copied by rivals and offered at lower costs which makes it difficult for the iPhone to sustain itself at a high price. Although the company is seeing good momentum in its services business, this along with iPhone upgrades will not be adequate for growth in the long term.
When Apple stopped reporting quarterly device unit sales, it raised concerns that the numbers were falling indicating a weakness in demand. The slowdown in iPhone sales and the US-China trade war is likely to affect Apple in 2019 as well.
After Apple lowered its outlook, its shares plunged falling as much as 10% on Thursday wiping billions of dollars from its market cap and reaching its lowest level in 18 months. Despite the stock crash and slashed outlook, analysts have not gone completely bearish on Apple. In fact, a majority of them believe that investors should hold on to the stock and that the situation will improve.
Some analysts believe that Apple has the cash and resources to bounce back and the fact that the company recently disclosed huge expansions plans is an indication of underlying strength. Apple’s shares gained 4% on Friday paring its losses and showing signs of recovery. Although Apple will face some difficulties in 2019, the company can be expected to maintain its momentum and perhaps come up with some interesting strategies this year.
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