Apple might not be the global economy’s canary in the coal mine after all and stocks are poised for a bounce even if the company doesn’t get its act together.
The former world’s most valuable public company has been forced to cut iPhone prices in China — which represents about 20 per cent of its sales — to help deal with dwindling demand and stiff competition from the likes of Huawei. Apple has also become something of a poster child for American technology.
Wedbush analyst Daniel Ives called on Apple (AAPL) to lose its pricing hubris in a research note yesterday. Today he told Yahoo Finance Canada Apple’s price cut is a strategic move in the right direction.
“They need to put a fence around its backyard, especially as we believe 60 to 70 million iPhones in China are coming up for an upgrade over the next 12 to 18 months,” says Ives.
Apple’s struggles have stoked fears about a slowing economy amid a trade war between the U.S. and China.
The outlook was the last thing volatile stock markets needed. But could investors be reading too much into it?
“I think the big debate is whether the sales miss was an Apple issue or an issue for the entire market, and I think it’s a combination, but right now most people are looking at is as mostly an Apple-only issue,” Greg Taylor, CIO and portfolio manager at Purpose Investments, told Yahoo Finance Canada.
“Outside of the China miss I think the biggest question with them right now is what are they going to do next to develop new products to try to get growth going back into the company and to show that they are innovating again.”
Large corporations doing well and Fed is flexible
“Companies have been doing well, but the big question will be if the strong U.S. dollar hurt the international earnings,” says Taylor.
Taylor also says fears of fed rate hikes going away will also help markets, especially if a slowing economy leads to a rate cute.
Speaking at the Economic Club of Washington, Fed Chair Jerome Powell says slowing Chinese economy is a worry. He says the Fed is flexible and can adjust policy.
Taylor also points out markets have bounced back now that out tax-loss selling has ended.