Coverage: Apple warns on holiday sales, sending stock price down

Apple Inc. on Thursday warned that sales for the crucial holiday quarter would likely miss Wall Street expectations, which Chief Executive Tim Cook blamed on weakness in emerging markets and foreign exchange costs.

Stephen Nellis of Reuters had the news:

The disappointing forecast by the world’s most valuable technology company helped send shares down as much as 7 percent, taking roughly $70 billion off Apple’s market value and forcing that value below $1 trillion. The forecast could also deepen concerns for technology companies that saw a sell-off after misses by Amazon.com Inc and Google parent Alphabet Inc.

Apple said it expects between $89 billion and $93 billion in revenue for its fiscal first quarter ending in December, with a midpoint of $91 billion coming in below Wall Street expectations of $93 billion, according to IBES data from Refinitiv.

Cook in an interview with Reuters said that Apple is “seeing some macroeconomic weakness in some of the emerging markets.” He later told investors on a conference call that weak markets included Brazil, India, Russia and Turkey. Sales were flat in the fourth quarter in India, Cook said.

Shara Tibken of CNET reported that the company is still boosting prices:

Apple iPhone unit sales may not be growing, but its strategy to boost prices is working. The iPhone ASP has been above $700 since Apple launched the iPhone X. The even pricier XS Max, the first iteration of such a device, has proven popular with Apple fans and likely helped boost Apple’s ASP to an all-time high.

Still, Apple said that for the first quarter, the first full period with iPhone XS and XS Max sales, it should report revenue of $89 billion to $93 billion. Analysts polled by Yahoo Finance projected $92.9 billion. Last year, Apple’s first-quarter sales totaled $88.3 billion.

The forecast indicates that Apple’s newest phones may not be flying off the shelves for the holiday season. Apple’s selling a lot of devices, but it’s not quite as many as anticipated. Apple’s new, cheaper iPhone XR, which went on sale last week for $749, also will start contributing to sales in the first quarter, something that will likely lower overall ASPs.

Forrester analyst Julie Ask noted that to grow revenue going forward, Apple has to find more customers, which is difficult because most growth comes from less developed economies like Nigeria and India, and sell more devices like watches and smart speakers.

Emily Bary of MarketWatch.com reported that Apple’s holiday sales prediction would still be a record:

Apple’s forecast for the December period calls for revenue of $89 billion to $93 billion. Those are staggering numbers that would beat Apple’s quarterly record of $88.5 billion set last year in the holiday quarter. But it also represents sales growth of less than 5% from that performance last year, when the $1,000 iPhone X helped juice sales.

Given the company’s slate of expensive new phones and its proven success getting users to pay up for them, some are wondering why the company wasn’t more upbeat with its forecast.

Chief Financial Officer Luca Maestri gave a few reasons on the company’s earnings call. One is the timing of product introductions, given that early adopters may have bought the pricey new iPhone XS or iPhone XS Max before the current December period began, while last year’s Apple fanatics would have had no choice but to wait until the holiday quarter if they wanted the new iPhone X, then Apple’s flagship device.

“Obviously, this resulted in a more pronounced [average selling price] growth in Q4 of 2018 and obviously a tougher compare for Q1,” Maestri said on the call.