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Apple Markets

Wall Street Reacts to Apple

The stock market is often described as an indicator of future expectations but sometimes it seems to be caught napping. How else to explain Thursday’s sell-off triggered by Apple’s admission that a slowdown in China and changing consumer habits will hurt its first quarter results? The only reaction can be “duh.” There have been warnings of both trends for a long time now.

It’s hardly a secret the smartphone market hasn’t grown in the past couple of years. According to Strategy Analytics, global smartphone shipments have hovered around 1.5 billion since 2016, although the firm projects 2018 shipments will decline 5% to 1.44 billion. It’s also not a secret that the firms that are gaining market share are Chinese firms such as Huawei and Xiaomi. Those firms are doing well globally and in their home market—to Apple’s detriment. We noted in this story last fall that Apple’s share in China had declined in recent years. Maybe Trump’s trade war has made the China problems worse but that also shouldn’t have been a surprise to anyone listening to Trump since the election campaign.

In a smart piece on Wednesday, Bloomberg columnist Shira Ovide alluded to some of this history, asking why Apple CEO Tim Cook had not made the admissions about the changing smartphone market before. The answer is that Cook, like most other public company CEOs, prefers to emphasize the positive, rather than the reality.

Apple stock has been sliding since September, thanks to warnings from Apple suppliers and other indications that iPhone sales weren’t doing well. But its latest sell-off suggests investors hadn’t fully appreciated just how problematic is Apple’s situation: It is reliant on a market that is no longer growing.

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