This News Is Worrisome for AAPL Stock
Apple Inc. (NASDAQ:AAPL) may not like much about the year 2016, as it turned out to be one of the most challenging years ever.
Sales of Apple’s iconic “iPhone” declined for the first time, sending AAPL stock into a downward spiral. The victory of Donald Trump as U.S. president did not help either, as he kept putting pressure on the smartphone maker to shift its production to the United States.
And the latest piece of news about Apple has not helped matters.
Reports came in last weekend that Apple Inc. may trim production of its iPhone family by around 10% in the first quarter of 2017, according to calculations based on data from suppliers. The phones have been selling more sluggishly than expected. Information on the production of the latest models and global sales suggest that there will be cuts in both the “iPhone 7” and “iPhone 7 Plus” lines in the coming quarter. (Source: “Apple to slice iPhone production 10%,” Nikkei Asian Review, December 31, 2016.)
Adding to Apple’s problems, just a few days ago, Consumer Reports magazine withheld recommending the new “MacBook Pro,” as the machine did not deliver the promised battery life. Phil Schiller, Apple’s senior vice president of worldwide marketing tweeted that the company was working with Consumer Reports to understand their battery tests, as the results did not match Apple’s extensive tests or field data.
The new MacBook Pro, with a touch bar, had already disappointed many Apple fans earlier, and had dented the sentiment for AAPL stock. 2016 was a challenging year for Apple, as the company failed to impress its fans with the removal of the headphone jack in the iPhone 7, or with the features in the new Mac.
Things do not look bright for Apple from here, as global smartphone sales are likely to remain sluggish. Although AAPL stock posted gains in line with the S&P 500 Index, investors were not prepared for the bad news on the iPhone front.
Chart courtesy StockCharts.com
To add to these woes, AAPL stock is also under political pressure to consider shifting its manufacturing base to the United States. President-elect Donald Trump has proposed high tariffs for goods produced in China, but has also conveyed to Apple CEO Tim Cook that he would provide lots of incentives to the company if it builds its manufacturing base in the U.S.
Going ahead in 2017, Apple’s services business might grab the limelight from its hardware business. However, this transition is not likely to be smooth. Investors are looking forward to the next earnings announcement, the arrival of the “iPhone 8,” and whether Apple can shift its manufacturing base from Asia. The year 2017 appears to be challenging for AAPL stock.