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Apple Stock Slips ahead of Its Q3 Earnings Release

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Apple (AAPL) stock was down about 0.5% as of 1:44 PM ET today after President Donald Trump’s tweets about China dampened hopes of a resolution to the US-China trade war. President Trump criticized China in the tweets despite ongoing in-person US-China trade talks. Trump accused China of not buying any US agricultural products as promised.

His tweets affected the broader market, with the S&P 500 and the Dow Jones down 0.35% and 0.23%, respectively, at 1:44 PM.

A report by Canalys dated July 30 also negatively affected Apple stock today. The report indicated the company’s falling iPhone sales in China. According to Canalys, Huawei smartphones saw a 31% rise in shipments in China, while Apple’s shipments fell 14% in the second quarter.

Apple is set to announce its fiscal 2019 third-quarter results today after the close of financial markets. Concerns about the company’s iPhone sales are also reflecting in today’s stock decline.

Sentiment ahead of results

A CNBC report today indicated the views of several analysts ahead of Apple’s third-quarter results. Analysts at Morgan Stanley, Bank of America, JPMorgan Chase, and UBS currently give AAPL “buy” ratings. Goldman Sachs, Bernstein, and Credit Suisse remain on the sidelines with “neutral” ratings.

Several factors are backing certain analysts’ optimism, including strength in Apple’s Services business and the expectation of an improving trend in its iPhone sales. But though Apple’s Services business is growing rapidly, it’s not significant enough to offset the weakness in its iPhone sales. The company’s iPhone revenue accounted for 58.3% of its overall top line in the first half of fiscal 2019. In comparison, its Services segment contributed 15.7% to its overall revenue in the period.

Trade war concerns

Another matter of concern for analysts and investors alike is the US-China trade war’s effect on Apple’s business. Apple’s June letter to the US Trade Representative reflected its worries that higher tariffs resulting from the trade war would drag on its global competitiveness. It expects the increased tariffs to dent the sales of its key products, including iPhones, iPads, Macs, and accessories. Last week, Trump tweeted that his administration wouldn’t consider any tariff waivers for Mac Pro parts made in China.

On today’s conference call for Apple’s third-quarter results, analysts will be looking for an update from Apple’s CEO about the trade conflict’s impact on the company’s business.

Third-quarter estimates

Analysts expect Apple’s revenue to rise 0.2% to $53.4 billion in the third quarter of fiscal 2019. They expect this marginal growth after the company’s revenue fell for two consecutive quarters. Analysts expect its adjusted EPS to fall about 10.3% to $2.10. For more information, read Key Aspects to Look for in Apple’s Q3 Results Today.

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