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Apple’s Guidance Cut Could Suggest a Big Mess

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Apple’s guidance cut

The first trading day of 2019 proved to be terrible for Apple (AAPL) investors. On Wednesday, January 2, after market close, the company’s CEO Tim Cook confirmed its iPhone sales troubles. In a press release titled “Letter from Tim Cook to Apple investors,” Cook cut the company’s guidance for the quarter ended December 29, 2018. Let’s take a closer look.

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China slowdown hurts

In the press release, Cook not only blamed its falling Chinese iPhone sales but also indirectly hinted towards many other challenges Apple might continue to face going forward. The company has revised its revenue guidance for the first quarter of fiscal 2019, which ended December 29, 2018, to about $84 billion from its earlier guidance of revenue between $89 billion and $93 billion.

In addition, Cook also said that Apple now expects its last quarter gross margins to be about 38% as compared to a range of 38% to 38.5% given earlier. After the news came out, Apple stock fell 7.5% to $146 in the after-hours trading session on Wednesday from its regular trading session’s closing price of $157.92 for the day.

Apple’s guidance cut was mainly due to the China slowdown, and the guidance cut also affected other tech stocks. Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Facebook (FB), and Netflix (NFLX) plunged 2.8%, 2.1%, 2.1%, 1.6%, and 2.5%, respectively, in after-hours trading on Wednesday. Alibaba (BABA) and Baidu (BIDU) also fell by 2.7% and 1.4%, respectively, in after-hours trading on January 2. The S&P 500 benchmark and the NASDAQ Composite Index (QQQ) (VTI) traded on a mixed note on Wednesday and settled with 0.1% and 0.5% minor gains, respectively. Apple’s guidance cut could be an early indication of a big mess for many other tech companies’ future growth, which could be the reason why other tech stocks also fell.

Continue to the next part to find out the key reasons Tim Cook mentioned for the guidance cut in the next part of this series.

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