Apple upgrades its MacBooks and cuts prices
On Tuesday, Apple (AAPL) announced a cut in MacBook Air and MacBook Pro prices in preparation for the back-to-school season. The pricing of the MacBook Air now starts at $1,099, while the entry-level 13-inch MacBook Pro’s pricing starts at $1,299. The company is offering another $100 discount to college students on both these entry-level notebooks.
In addition to these price cuts, Apple has upgraded its MacBook Air by adding True Tone to its retina display. The company launched its latest MacBook Air model in October 2018 with its prices starting at $1,199.
Similarly, the 13-inch entry-level MacBook Pro now comes with the latest eighth-generation quad-core processors, which Apple claims will make the notebook twice as powerful. Apple has also added features such as a touch bar, a touch ID, a True Tone retina display, and an Apple T2 security chip to this entry-level MacBook Pro.
What does this mean for investors?
In the second quarter of fiscal 2019, Apple reported a sharp double-digit fall in its iPhone sales, while its Mac sales also fell. During the quarter, the company’s iPhone revenue stood at $31.1 billion, down 17.3% YoY (year-over-year). Its Mac segment sales fell 4.6% to $5.5 billion.
To revive its sales, Apple tried to pass on the benefits of a cut in its value-added tax in China to its consumers in April. According to a CNBC report, the prices of Apple products—including iPhones, iPads, Macs, and AirPods—dropped by nearly 6% in its online store in China. The move marks the second time Apple has cut its product prices in China this year.
While Apple’s price cut on its entry-level MacBooks and its special discount for college students could help it attract more customers, the strategy might also indicate its struggle to keep its Mac segment’s sales growth intact.
Analysts are turning negative
On July 8, Apple stock fell 2.5% after Rosenblatt Securities downgraded its recommendation on the company to a “sell” from a “hold.” Rosenblatt analyst Jun Zhang said that the company “will face fundamental deterioration over the next 6 to 12 months,” CNBC reported. Zhang believes that “new iPhone sales will be disappointing, [and] iPad sales growth will slow in the second half of 2019.” The analyst maintains a price target of $150 on Apple.
In May, HSBC cut its price target on Apple stock to $174 from $180, citing the negative impact of US-China trade tensions.
So far this year, Apple stock has managed to outperform the broader market. As of the end of the day on Monday, Apple stock was trading with a 26.8% YTD (year-to-date) rise compared to the 18.7% and 22.1% gains in the S&P 500 benchmark and the Nasdaq Composite Index, respectively.
On Tuesday at 12:00 PM ET, Apple stock was trading at $200.73, up 0.4% so far on the day. The stock may continue to face stiff resistance near $216 on the upside.
Apple is scheduled to announce its fiscal 2019 third-quarter earnings results on July 30. If the company continues to report sharp declines in its iPhone and Mac sales in the quarter, the news could hurt the investor sentiment and turn its stock negative.