Apple Inc. CEO Tim Cook – as per a report from Reuters – is traveling to China this month to meet the high-level authorities, including ones in charge of “propaganda.” The smartphone maker is facing a declining revenue in China – the second-largest market for the iPhone maker after the US – hence, this meeting is quite important for the US firm.
China is it a concern?
Last month, China’s media watchdog shut down Apple’s iBooks stores and iTunes Movies, which were launched in the region just six months ago. China’s President Xi Jinping is attempting to consolidate government control of the media and web, and hence, came the closure of Apple’s online stores.
“China must improve management of cyberspace and work to ensure high-quality content with positive voices creating a healthy, positive culture that is a force for good,” said the President as per the Chinese state press. Also, it was reported by The New York Times that after the shutdown of Apple’s services, the President met with the tech leaders of domestic firms including Alibaba and Huawei.
Apple Inc. investors are apparently worried after this intervention. Recently, a major shareholder – Carl Icahn – sold his stake in the Cupertino-based firm, and is worried that the Chinese government could make it quite difficult for the iPhone maker to sell there.
Apple’s hardware business is more profitable than the online stores, but the latter, still comprises a significant portion of Apple’s business. For the first time in 13 years, Apple’s revenue declined, but the services business, including the sales of music, apps, books, movies and more is actually growing.
Therefore, if its CEO is heading to China, then it can be expected that topics like closure of Apple’s online stores will be on his agenda. During last week’s earning call, Cook said “[We] may not have the wind at our backs that we once did, but it’s a lot more stable than what I think is the common view of it. We remain really optimistic on China.”
Apple hits a new 52-week low
Meanwhile, Apple shares dropped another notch this Friday to a 52-week low of $91.85. This beats the previous low of $92 a share, set during a market selloff on August 24, 2015 when the Dow dropped more than 1,000 points during the session. However, the shares rebounded to close at $92.72, but the damage is already done.
The investors are apparently worried that the smartphone market has matured – like the PC market. Despite bullish price targets from the analysts, Apple shares have lost more than a quarter of their value during the previous year. Even Icahn – an activist investor – who sold all his shares, predicted before that the iPhone maker would be the first to be valued at $1 trillion.
Now, all hopes are tied to the next-gen iPhone 7. Interest in this version appears better than for the 6s, but not as strong as for the 6, “and upgrade cycles appear shorter in the US and China though not in other countries,” says Steven Milunovich – analyst at UBS.
Over the past 12 months, more than $230 billion in shareholder wealth has been erased and hence, the investors are worried. Still, Apple Inc. is worth about $510 billion, and the most valuable stock in the S&P 500. And, the analysts are still positive on the stock, predicting it to be worth $124.33 in 18 months. Meanwhile, Google’s parent firm – Alphabet – is rapidly closing the gap, and is worth almost $490 billion.