Apple can't outrun China worries, stock drops into bear territory

Posted:
in AAPL Investors edited August 2015
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.
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Comments

  • Reply 1 of 177
    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.
  • Reply 2 of 177
    misamisa Posts: 827member
    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.
  • Reply 3 of 177
    e1618978e1618978 Posts: 6,073member

    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.

  • Reply 4 of 177
    misa wrote: »
    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"

    Exactly. I was going to say the same thing, but you beat me to it.
  • Reply 5 of 177
    tmaytmay Posts: 3,459member
    Quote:

    Originally Posted by e1618978 View Post

     

    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.

  • Reply 6 of 177
    rogifanrogifan Posts: 10,669member
    misa wrote: »
    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.

    Except the Dow was down 3% and Apple 6%. Over the past month the Dow is down 8%, Apple down 19%.
  • Reply 7 of 177
    lkrupplkrupp Posts: 6,699member

    Worse thing the little investor can do now is sell. Ride it out. It will come back. But unfortunately some will panic and hurt themselves badly by selling low and then buying back high. 

  • Reply 8 of 177
    atlappleatlapple Posts: 496member

    Amazing to think Apple has lost 148 Billion in such a short period of time.

  • Reply 9 of 177
    jungmarkjungmark Posts: 6,647member
    Apple will fail in China because
    A. iPhones are too expensive
    B. Cheap iPhone knockoffs
    C. Sammy
    D. Xiaomi
    E. Currency devaluation
    F. Mass extinction

    Only one of these options is true.
  • Reply 10 of 177
    SpamSandwichSpamSandwich Posts: 30,724member

    As I've written before, (and this is not investing advice...for anyone) I have a buy order in for $95, just in case the market panics/engineers panic that continues to spread. I consider anything close to or below $100 for AAPL absolutely nuts and a great buy.

  • Reply 11 of 177
    misamisa Posts: 827member
    rogifan wrote: »
    Except the Dow was down 3% and Apple 6%. Over the past month the Dow is down 8%, Apple down 19%.

    YTD, The DOW is down 7.65%, AAPL is -4.19%. A full year still has AAPL at +7.94 where as the DOW is -1.21%.
  • Reply 12 of 177
    fallenjtfallenjt Posts: 3,971member
    Seriously, I would put another $30k if I have the cash now.
  • Reply 13 of 177
    tallest skiltallest skil Posts: 43,399member

    It’s nothing to do with Apple. The entire system is going to collapse. Keep that in mind.

  • Reply 14 of 177
    SpamSandwichSpamSandwich Posts: 30,724member
    Quote:

    Originally Posted by Tallest Skil View Post

     

    It’s nothing to do with Apple. The entire system is going to collapse. Keep that in mind.




    Pretty much true. The economy is only "afloat" because it is propped up by huge injections by the Fed into the banking sector and banks have mostly used that "free money" to buy property and expand their unneeded services. I'm not completely surprised that nearly no media covers this economically destructive cycle of stupidity.

  • Reply 15 of 177
    It’s nothing to do with Apple. The entire system is going to collapse. Keep that in mind.


    Pretty much true. The economy is only "afloat" because it is propped up by huge injections by the Fed into the banking sector and banks have mostly used that "free money" to buy property and expand their unneeded services. I'm not completely surprised that nearly no media covers this economically destructive cycle of stupidity.

    Ssh, you two are giving away the "surprise" coming! :lol:
  • Reply 16 of 177
    If oil keeps going down the slide might continue. I'd wait and see before buying anything!
  • Reply 17 of 177
    Yet.. Last quarter Apple proved to contrary... They kicked butt in china... While most if the china slowing down data causing panic now is from the same period!

    As for currancy... I feel apple has provisions for currancy fluctuation... Any wise CFO would not allow other wise..

    Given the provisions... Apple can transfer the lowerd manufacturing cost to consumers in china. Maintaing their margins and maintaing prices in china.

    Yet Due to lower manufacturing cost... Apples margins will be enhanced everwhere else in the world where they wont need to lower prices due to currancy !

    Result :Big net win for Apple.

    China lowering of currancy is great for exports. China is primarily an export based economy.
    Increased exports helps chinese economy and consumer prosperity ..

    All is not as dark as its being painted.
    Problems are: bastard manipulators at WS.... And kneejerk reaction from investor comunity !
    I
  • Reply 18 of 177
    So, what you're saying is . . . It could be a good time to buy?
  • Reply 19 of 177
    Interesting. Even without China, Apple should be valued at much more than it is.

    I guess people forget the USA and other countried have economies as well - which Apple has successfullly leveraged.

    Apple sells the most Macs and iPhones ever, is selling a successful smartwatch and... this. riiiight.
  • Reply 20 of 177
    tallest skiltallest skil Posts: 43,399member
    Originally Posted by JonInSD View Post

    So, what you're saying is . . . It could be a good time to buy?



    If you like losing everything, sure.

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