Apple Inc. shares were down by more than 10 percent at one point on Monday morning, but CEO Tim Cook wasn’t about to let that stand. Mr. Cook responded to a request from Jim Cramer of CNBC for answers on Apple’s China business. He said that sales were strong in the region in both July and August. That news had a calming effect on shares, and they’re some of the best performers in tech on Monday morning after a quick turn around.
Shares in Apple opened at $94.87 but rose quickly after the market opened. At time of writing shares in the phone maker were selling for $105.12, down just a fraction for the day so far. The S&P 500 was down by more than 2 percent at time of writing.
Tim Cook gets proactive
Apple doesn’t usually respond to requests for comment, but the firm has changed its stance in recent months. It’s become much more open about revealing info about its business, especially when it thinks that the reigning story is hurting the value of shares.
This morning shares in Apple were down very strongly after China’s stock market crashed, and US markets followed suit. Apple was hurt more sorely than other stocks early on. That’s because of the firm’s exposure to China. Rumors that iPhone sales in the East Asian country will be slower than thought helped to make traders more nervous. Tim Cook reassured them.
In a response to Jim Cramer of CNBC Mr. Cook said his firm had seen “strong growth” in China in July and August. He added that the app store in the region is doing better than ever before, and that iPhone activations have accelerated in recent weeks.
Mr. Cook wrote “I continue to believe China represents an unprecedented opportunity over the long term as LTE penetration is very low and most importantly the growth of the middle class over the next several years will be huge.”
Apple protects its shareholders
This isn’t the first time in recent days that Apple has decided to interfere in a narrative that the market is supporting. Last week after a report from Music Watch suggested that 48 percent of those that had tried the service had already dropped it. Apple reached out to The Verge and corrected the site with its own numbers.
Apple said that its numbers showed 79 percent of people who signed up to Apple Music were still using it. Apple normally keeps info about its products secret, saving the big numbers for major events. It has changed those tactics with Apple Music, however, and this may be the start of a new Apple that cares more about how the market sees it.
Eddy Cue, Apple’s VP of Internet software and services told the USA Today on August 6 that the firm was very happy with the way that Apple Music was working. He said that the firm has brought 11m subscribers to the service.
At the time he added, in a defense that foreshadowed Mr. Cook’s comments on Monday, that the App Store had $1.7B sales in July and there was “particular momentum in China” driving those numbers.
Apple’s China worries put in perspective
Dan Ives of FBR Capital kept an Outperform rating on shares in Apple this morning. He said that “With panic running wild about China [in] the last few weeks [and] this morning, many on the Street are now worried that Apple’s growth story is in the rear-view mirror and dark days are ahead.”
The firm is set to join “a host of new product categories” according to Mr. Ives, and it will enter a new phase of sales growth with the roll out of the iPhone 7.
Apple is still in a much weaker position on the market than it was last week, and shares are very far away from the highs of more than $130 that were regular punctuation from February through to July.
Cantor Fitzgerald’s Brian White agreed with Mr. Ives. In a report released early this morning the analyst said that he was keeping his $195 price target on shares in the firm. Mr. White said that even a global recession wouldn’t justify the current value of shares in Apple.
He said that China fears had lead to a “severely depressed valuation” that did not represent Apple’s core business.
Not all analysts are positive on iPhone sales, however. Ming Chi Kuo of KGI Securities says that despite the addition of Force Touch to the iPhone 7 sales of the firm’s smart phone are likely to be flat or lower than last year in the fourth quarter of the year.
Jefferies, among other Wall Street research houses, is also looking for sales to come in flat for the year ahead. Many, like Sherri Scribner of Dutsche Bank, think that markets have become saturated and Tim Cook’s firm runs out of people to sell iPhones to.
Tim Cook interferes in Apple
Many other firms have CEOs and other execs that drop news about their performance all the time. Tesla Motors Inc CEO Elon Musk can turn markets inside out with just a Tweet or two, and many other execs with a big presence can do the same. Tim Cook tends to stay quiet, however, and his new mode of active defense is a change worth considering.
Apple has begun to correct false news stories, and to step in when the stock market looks about to punish its shares. That may be a simple change in the way the firm handles its PR, it might be a defensive move from a firm that feels wrongly persecuted, or it may be Mr. Cook trying to help out shareholders.
Since Steve Jobs died and Tim Cook took over Apple has built a much warmer relationship with its shareholders. He has constantly increased the firm’s dividend and buyback, using the cash pile that sales of the iPhone have helped it build up in recent years.
His interference in the market’s runaway narrative about a collapse of sales in China is something that those shareholders will be thankful for on Monday.
Mr. Cook’s outlook on China won’t solve the problem that Wall Street traders are having with Apple, but it has done some work in rolling back losses seen after the story told on Wall Street turned very negative.
It’s not clear what it says about Apple going forward. Tim Cook, and the rest of the firm’s PR machine, may retreat behind the lines they’ve kept to for many years or they may move even forward and keep putting new info out there when the market has it wrong.
Perhaps it was simply that the request came from Jim Cramer that lead Apple’s CEO to answer the questions. It may have been a coincidence that Tim Cook weighed in today, or it may be part of a new policy that will change the way Apple works, and the way it affects the market’s view of its future.
Whatever the reason, the calming effect of Mr. Cook’s statement has been clear. Shares hit $92 this morning, but are well over $100 right now, and those holding them are breathing a sigh of relief.