Volatility is still very much alive and well.

All as markets head lower after Apple stunk up the market, cutting sales guidance for the first time in 15 years.  All thanks to a drop in iPhone sales, China’s economy and trade war tensions.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” said Apple CEO Tim Cook, as quoted by Yahoo Finance. “In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”

Apple now expects to post first quarter revenue of $84 billion, which is below its initial guidance for $89 billion to $93 billion.

As you can imagine, investors and analysts alike aren’t too pleased with the news.

Analysts at Jefferies downgraded the stock from a buy rating to a neutral rating, noting, “Biggest miss in years.  Apple’s business in China appears to be rapidly deteriorating". 

“The bottom line is that we were are late, but we can no longer recommend Apple,” says analysts at Macquarie, which also downgraded the stock to a neutral rating.

Bernstein analysts cut their Apple price target from $210 to $160.  Bank of America cut its target from $220 to $195.  Morgan Stanley just cut its target from $236 to $211.  JP Morgan cut from $266 to $228.  And Goldman Sachs cut from $182 to $140.

“Apple’s guidance cut confirms our negative view on demand in China that we have been flagging since late September ... We are reducing our FY19 revenue estimate by 6% to $253bn and FY19 EPS By ~10% to $11.66. We are also reducing our 12-month price target to $140 based on a 12x P/E multiple (ex. cash ~10x) as we see the potential for further downside to FY19 numbers depending on the trajectory of Chinese demand in early 2019,” noted Goldman Sachs, as quoted by CNBC.

The list of analyst cuts goes on and on.  None are happy with the latest news.

And rightfully so…

At the same time, the news is doing quite a bit of damage to Apple supplier stocks, too.

  • Advanced Micro Devices (AMD) fell more than 2% Thursday morning
  • Logitech International (LOGI) slipped more than 5%
  • STMicroelectronics NV (STM) fell more than 8.5%

While the initial shock is quite damaging for all involved, we believe it will create sizable opportunities once the smoke and trade war fears finally clear.

Stay tuned to The Cheap Investor for more.