Red Sea: why Apple and other technology companies are falling



    More recently, Apple has been a source of positive news - the company has become the first American organization to reach $ 1 trillion. By early October, the company's shares had risen by almost 40% since the beginning of 2018.

    But then the situation changed. Shares have fallen by 17%, which brought serious losses to many shareholders. According to Barron's resource estimates , total losses in this period are about $ 190 billion.

    In September, Apple released the new iPhone XS for $ 999 and the iPhone XS Max for $ 1099, as well as the cheaper iPhone XR model for $ 749. Many analysts predicted the success of a new line of devices, but not everything turned out so smoothly.

    What factors affect the decline in the price of Apple shares


    The first wake-up call was the November sales report. The company has published a disappointing forecast for the next quarter (and this is taking into account the period of the New Year holidays).

    In addition, market participants did not like the company's decision to stop publishing data on sales of individual types of devices (unit-sales figures) and “focus on the big picture” in further reporting. Observers and analysts felt that this step is indicative of failed sales of new gadgets.

    This was indirectly confirmed by the situation with Apple counterparties. So the company Lumentum Holdings (LITE), engaged in the development of 3D laser sensors (used in FaceID for the iPhone) lowered its sales forecast for the quarter by 17%, referring to the decline in orders from a "large customer"

    At a conference call with investors, CEO Lumentum Alan Lowe, at first, this unnamed major customer began to ask for a delay in deliveries, and then lowered the volume of orders. Later, the company's CFO called this customer the largest for the company, and from the Lumentum annual report published earlier, it follows that it was Apple for it - it accounted for 30% of all sales.

    In addition, the financial quarterly forecast was lowered by Qorvo. The company owns factories for the production of components for smartphones. Apple is a major customer of the company, according to the annual report it accounts for up to 36% of revenue.

    Why are falling shares of other technology companies


    In the future, other major technology companies, such as Alphabet, Amazon, Facebook and Twitter, also experienced a fall in stocks. FAANG shares (Facebook, Apple, Amazon, Netflix and Google) have lost an average of 14.3% over the past three months. At the same time, the Nasdaq Composite index, which unites technology companies, grew by 20% in August, and since then has fallen by 9%.

    The authors of an analytical note on Yahoo Finance explain this by the changed interests of investors. They earned on the shares of technology companies during the growth at the end of the summer, and now switched to the securities of organizations from more traditional areas. For example, Coca-Cola (+ 11%) and Procter & Gamble (+ 13%) stocks are rising in price - they have a stable business, they pay dividends.

    As a result, the disappointing sales results of technology giants (not only Apple faces them) force investors to look for new opportunities for earnings.

    With the help of ITI Capital, you can buy shares of the largest American technology companies, such as Alphabet, Apple or Facebook, as well as Coca-Cola, McDonald's or Boeing securities. Buy American stocks here .


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