Apple’s falling Chinese sales
Media reports suggesting Apple’s (AAPL) sales troubles in China started taking a toll on its stock in the fourth quarter of 2018. These negative reports also prompted many notable Wall Street analysts to cut their estimates on Apple’s future earnings growth.
As a result, Apple stock ended 2018 with a 6.7% loss compared to the 6.2% and 3.9% losses in the S&P 500 Index (VTI) and the NASDAQ Composite Index (QQQ), respectively.
Apple’s efforts to revive iPhone sales
In the last few months, the debate about Apple iPhones being overpriced has heated up. Many analysts have argued that the heavy price tags of iPhones could be one of the reasons for falling iPhone sales (XLK), especially in emerging markets such as China.
On Apple’s fiscal 2019 first-quarter earnings conference call, CEO Tim Cook highlighted foreign exchange as one of the reasons for rising Apple product prices in the international market. Cook said, “What we have done in January and in some locations in some products is essentially absorb part or all of the foreign currency move as compared to last year and therefore, get close or perhaps right on the local price from a year ago.”
Another factor that Cook blamed for a sharp rise in iPhone’s prices in some markets, especially in developed countries, was subsidy issues. Informing investors about the steps the company was taking in this regard, he said, “We’ve got a number of actions to address that, including the trade-in and the installment payments which I had mentioned as well.”
Will it help revive iPhone sales?
While these steps Apple has taken (or plans to take) might lower iPhone prices a bit, they might not help the company fend off the competition from local players, especially in highly competitive markets such as China. At a time when iPhone sales are falling and no near-term respite is on the horizon, Apple has started focusing on strengthening its other revenue sources, including its Services segment. We’ll discuss this in more detail in the next article.