Friday, January 8, 2016

Apple Stocks Fall, Partly Due to Struggling Chinese Economy

While Apple is a large company with a variety of different products, many investors measure the company's success solely on the sales of a single product: the iPhone. Because of its popularity around the world, analysts tend to use the statistics of iPhone sales to monitor how the company as a whole is doing. Unfortunately, when iPhone sales are down, investors see this as a red flag and look to jump ship, thereby causing Apple stocks as a whole to go down. Paresh Dave and David Pierson write in their article about some of the possible factors contributing to lowered iPhone sales, as well as how this affects the company.

While just over a month ago, Apple stocks closed at $119, the same stocks have recently taken a plunge, going under $100 for the first time since October 2015. That's a decrease of over 15% in a single month, not a good sign for executives and potential investors. The iPhone 6S, this year's iteration of the popular cell phone, hasn't sold as well as predicted, in China as well as throughout the rest of the world. Several rumors have surfaced that assemblers and manufacturers of iPhones have recently been bracing for a slowdown in production, and financial analysts have determined that Apple has reduced supplies to Asian distributors.

While all of this may be coincidental, investors have taken these signs to be harbingers of future turmoil for the company and have decided to pull out for the time being. China's economy, which has doubled in the 7 years since Apple first opened stores and factories in the country, has a large impact on the company's success and failure, whether we like it or not. China's middle class is slowly expanding, opening up the market for iPhones to a much larger group of people, which will be good for sales when the economy gets back on track.

It seems that the first sign of a downturn for iPhone sales appeared in mid-December, when companies like Jabil Circuit and Dialog Semiconductor, which produce casings and internal parts for the iPhone reported lower-than-expected revenue predictions for the coming months. Decreased sales could be due to the fact that the newly released iPhone 6S is not very different from last year's iPhone 6, which would explain reduced demand, or it could be due to more economic factors. Either way, Apple seems confident that sales and stocks will go back up in the near future, especially with the new iPhone 7 in the works. While growth may be slow in 2016, executives believe that revenue will continue to grow at a rate of about 5%.

Where iPhone sales didn't boom as greatly as expected, products like the Apple Watch, iPad Pro, and Apple TV were popular gifts during the holiday season, thus boosting Apple's total revenue over the past couple of months. Apple executives are certain that China will remain a huge market for iPhone sales, but that it will just take a little bit of time for the economy to catch up again. In the long run, China is still one of the biggest markets for Apple products, even with current economic turmoil messing up sales. Eventually, Apple stocks should go back up, but the question is: How soon?

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