In the midst of a brutal day on Wall Street that saw the Dow take a 250 point hit, Apple was far from immune to the sell enthusiasm that gripped the floor of the NYSE yesterday (Jan. 6). Apple's stock price fell to its lowest level since Oct. 2014.
Stock price declined to just about $100 at its lowest point yesterday, a second day of price drops after reports began surfacing that Apple had dialed back its orders for the iPhone by as much as 30 percent. There have also been reports that Foxconn, Apple's main manufacturer, is subsidized to keep employees on the payroll, despite cuts in production.
“Foxconn confirms that our company has received financial incentives as part of an ongoing program by the Henan Department of Human Resources,” the company said. “The incentives were provided to Foxconn in recognition of our company’s contributions to maintaining our significant workforce at our Zhengzhou facility.”
Apple, of course, had no comment.
Apple declined to comment on reports of cuts in its supply chain.
What Apple did note was spending in the App Store, which was “over $20 billion” on apps in 2015, up from $15 billion App Store sales the year before. “Jan. 1, 2016, marked the biggest day in App Store history with customers spending over $144 million,” Apple said.
“Apple’s annual run rate for payments to developers is now around $14 billion. That’s an enormous revenue number for something which is effectively a feature in Apple’s platform," Jan Dawson, analyst at Jackdaw Research, told Financial Times.
But insofar as the iPhone is around two-thirds of Apple's revenues, investors are worried that a fall in iPhone sales could be a major issue for Apple, which has led to the pullback and new advice on price targeting.
Some, including Gene Munster at Piper Jaffray (a known Apple bull), cautioned that supply chain leaks were not always reliable indicators.
“While actual March iPhones remain a wild card, history suggests that triangulating news of supplier and production cuts tends to have less correlation to actual reported units,” Munster wrote in a note to clients.
Apple CEO Tim Cook has also warned in the past that overall sales are not easily gleaned from individual suppliers’ manufacturing.
Electronics manufacturers typically scale back production capacity after a holiday quarter, although Apple’s huge presence in China means that, in previous years, it has also seen a surge of demand during the Chinese New Year celebrations in February.