AppleInsider Staff
Apple shares fell by nearly 6 percent during Friday trading, sending the stock into bear territory for the first time in years as investors fret over the impact of China's apparent economic slowdown.
Apple closed this week at $105.76, off more than 20 percent from its 52-week high of $134.54. Such a decline is considered by many investors as a benchmark for "bear" status.
The slump has wiped nearly $160 billion off of Apple's market capitalization, and the reasoning behind the selloff isn't immediately clear — though recent bad news from China, including a string of surprising currency devaluations, maybe be partly to blame.
"China selling off, or China hitting an air pocket - that's a real thing," FirstHand Capital Management CIO Kevin Landis told CNBC. "Ask anyone who's ever been there, there is this sort of recklessness that really is sobering, and you figure, they're going to drive into a ditch periodically. It looks like that's what's happening again right now."
"Apple has a lot of exposure there, and they've pinned a lot of their growth to that market and they're going to have to pull those expectations down a bit," Landis added.
China has arguably become Apple's second most important market after the U.S., responsible for tens of millions of iPhone sales in a given quarter and a country in which the company is making significant investments. Current plans call for Apple to open more than 30 retail stores in China by the end of next year, and any economic downturn is likely to disrupt the still-emerging middle class that Apple's Chinese growth depends on.
Chip Loder
Christine McKee
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177 Comments
We've been in the third longest run in stock market history. The only two longer ones were the dot com bubble and just before the crash of 1929. This was bound to happen, and I suspect we haven't seen the end of this yet.
I love it when stock analysts ignore the bigger picture. They are going "Apple is moving into bear territory" when it's actually "the entire DOW is moving into bear territory" The mediocre amount of stock I even have in Apple has been a loss for several consecutive days, oh big deal. There is nothing to worry about when the stock moves in the same direction as the overall market. You worry when it moves against the market.
Apple had $13.2B revenue in China out of a total of $49.6 B worldwide last quarter. It is a significant market, 26.6% of total revenue - but I think that any loss that Apple has due to lower sales in China and worse US/China exchange rates will be balanced out by the following factors:
1. Apple's competitors will also be hit, and some of them don't have the deep pockets to survive the storm.
2. Apple manufacturers goods in China, so manufacturing costs should be lower due to exchange rates and idle factories
3. Luxury goods usually get hit hard during an economic crisis, but iPhones seem to not follow that rule - at least iPhone sales held up well in 2008/2009.
[quote name="Misa" url="/t/187828/apple-cant-outrun-china-worries-stock-drops-into-bear-territory#post_2764562"]I love it when stock analysts ignore the bigger picture. They are going "Apple is moving into bear territory" when it's actually "the entire DOW is moving into bear territory" [/quote] Exactly. I was going to say the same thing, but you beat me to it.
Apple had $13.2B revenue in China out of a total of $49.6 B worldwide last quarter. It is a significant market, 26.6% of total revenue - but I think that any loss that Apple has due to lower sales in China and worse US/China exchange rates will be balanced out by the following factors:
1. Apple's competitors will also be hit, and some of them don't have the deep pockets to survive the storm.
2. Apple manufacturers goods in China, so manufacturing costs should be lower due to exchange rates and idle factories
3. Luxury goods usually get hit hard during an economic crisis, but iPhones seem to not follow that rule - at least iPhone sales held up well in 2008/2009.
Yes on 1.
Apple and Samsung will probably do okay even in the worst of it, but if it gets recessionary, it actually gets even better for Apple; lots of technology to pick up on the cheap; lots of talent available.
Won't help current AAPL stockholders, but a great buying opportunity for all when AAPL hits bottom.