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Apple analysts have a long history of misreading weak iPhone demand

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Tim Cook, CEO of Apple, smiles during a demonstration of the newly released Apple products following the launch event at the Steve Jobs Theater in Cupertino, California, September 12, 2018.

Stephen Lam | Reuters

Tim Cook, CEO of Apple, smiles during a demonstration of the newly released Apple products following the launch event at the Steve Jobs Theater in Cupertino, California, September 12, 2018.

Stop me if you’ve heard this one before: An Apple analyst cuts iPhone shipment estimates based on weak supplier guidance, sendingthe company’s stock tumbling.

That’s the situation Apple was in Monday. Shares fell 5 percent, leading the overall market to painful declines, after iPhone supplier Lumentum cut its outlook.

It’s far from the first warning about iPhone shipments from the industry’s top analysts. This time it’s TF International Securities analyst Ming-Chi Kuo cutting estimates for the iPhone XR. In October, it was Goldman Sachs and estimates for the company’s sales in China. Before that, it was Nikkei, Citi Research or Barclays Capital, lowering their respective estimates for the iPhone X, the iPhone 8 or the iPhone 5 over the years.

The regular concerns around iPhone demand have become close to routine for Apple as global smartphone sales slow and upgrade cycles grow longer. Apple beats consensus estimates for shipments anyway most quarters.

In 2013, after Barclays lowered iPhone sales estimates, citing “our checks in the supply chain,” Apple reported 2.4 million more units shipped than the research firm predicted. In 2017, Citi called iPhone demand “modest” and “tempered,” and Apple beat Wall Street projections for iPhone shipments by about 1 million.

Ahead of Apple’s fiscal second-quarter report in May, the company’s market value dropped by more than $60 billion in just three trading sessions, and at least five analyst firms adjusted estimates. Reported shipments fell just shy of consensus estimates, but analysts admitted they were overly panicked.

As early as 2013, Apple CEO Tim Cook was warning against taking supply chain rumors to heart. He addressed rumors of reduced orders on the company’s earnings call for its fiscal first quarter of 2013, saying:

I would suggest it’s good to question the accuracy of any kind of rumor about build plans and also stress that even if a particular data point were factual, it would be impossible to accurately interpret the data point as to what it meant for our overall business because the supply chain is very complex. And we obviously have multiple sources for things, yields might vary, supplier performance can vary, the beginning inventory positions can vary. I mean, there’s just an inordinate long list of things that would make any single data point not a great proxy for what’s going on.

In short, Cook said Apple’s network of suppliers is deep and complicated. One supplier cutting its outlook doesn’t necessarily mean iPhone demand is down.

Of course, it’ll be harder to see how Apple stacks up against reports of declining sales when it reports earnings for the December quarter. The company said earlier this month it would stop breaking out individual sales figures for the iPhone, iPad and Mac. However, revenue and profit growth could still be a good indicator as to how well the overall iPhone business is doing as Apple tries new strategies to charge more for each device and layer paid digital services on top of each gadget it sells.

If history is any guide, analysts and investors tend to get unnecessarily spooked over one-off iPhone supplier rumors, just to be proven wrong after Apple discloses sales.



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Harvard professor Roland Fryer faces reports of sexual harassment

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Harvard University professor Roland Fryer speaks at the Clinton Global Initiative in New York on Sept. 25, 2008.

Ramin Talaie | Corbis Historical | Getty Images

Harvard University professor Roland Fryer speaks at the Clinton Global Initiative in New York on Sept. 25, 2008.

A prominent Harvard University economics professor is being investigated for sexual harassment, according to a new report.

Roland G. Fryer Jr., a 2011 MacArthur “Genius” fellowship recipient, is the one of the latest powerful men to get flagged amid the #MeToo movement, which took hold last year. More than 200 men have lost their jobs or major roles as a result, the New York Times said in October.

A Harvard investigator found that Fryer was involved in “unwelcome conduct of a sexual nature” with four women who worked at Fryer’s research lab, the New York Times reported on Friday. The investigator learned that one person who made an accusation about Fryer took disability leave in response to Fryer’s behavior, according to the report.

Allegations about Fryer came to light earlier this year but Friday’s New York Times article provides new details.

One woman who worked in the lab reportedly said that Fryer regularly made inappropriate comments about women, but that his reputation for being vindictive made it difficult for people to speak up. And two women told the investigator they disapproved of how Fryer had put his crotch in the face of a woman at the lab by placing his foot on her desk, the article said.

Read the full article here.



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Goldman says U.S.-China not likely to reach trade deal by March and more tariffs are coming

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President Donald Trump (L) and Chinese President Xi Jinping walk together at the Mar-a-Lago estate in West Palm Beach, Florida, April 7, 2017.

Jim Watson | AFP | Getty Images

President Donald Trump (L) and Chinese President Xi Jinping walk together at the Mar-a-Lago estate in West Palm Beach, Florida, April 7, 2017.

Goldman Sachs economists said it’s more likely than not that U.S.-China trade negotiators will not reach a deal in time to head off higher tariffs on March 1, and importers could rush to order their goods in January and February ahead of the deadline.

President Donald Trump and Chinese President Xi Jinping agreed to hold off on further tariffs until March 1 so the two sides could negotiate a trade agreement. China also agreed to remove new auto tariffs on U.S. imports, and Washington reported that Beijing is fulfilling another promise to purchase American soybeans, with its first significant order in six months, amounting to 1.13 million tons.

But they have to show some progress by the March 1 deadline in order to delay further action. “While we think it is a close call, we believe it is slightly more likely that negotiations will fall short of what is necessary for a further delay,” wrote the Goldman economists.

Goldman said international trade data reflect the front-loading of goods ahead of the last round of tariffs, and also the fact that soybean purchases had fallen off dramatically.

The October trade data were the first look at what happened after tariffs on $200 billion in Chinese goods and on $60 billion of U.S. goods went into effect in September. Goldman said imports and exports were both pulled forward before the $200 billion tariff round went into effect Sept. 24, and they both fell after tariffs were implemented, just as they had done after the first round.

Over the summer months, the U.S. had also implemented 25 percent tariffs on $50 billion in Chinese imports, and China responded in kind.

The effect was a widening in the U.S. trade deficit. “Declining exports along side modestly increasing imports pushed the trade deficit with China to an all-time high in October,” the economists wrote.

U.S. imports from China are about $5 billion lower on an annualized basis and exports are about $15 billion lower, due to seasonal factors surrounding soybean exports to China. The economists said there have been sizable shifts in a few large categories, which includes the impact from soybeans. About 60 percent of annual exports of soybeans to China are in the fourth quarter, about 25 percent in October alone.

“Excluding soybeans, exports to China are only modestly lower on a seasonably adjusted basis,” they wrote. As for imports, U.S. imports of electronic circuits and memory components rose ahead of the second round of tariffs and fell sharply after they were put in place

If there is no agreement by March 1, tariffs are scheduled to rise to 25 percent from 10 percent on $200 billion in Chinese goods.

WATCH:How big Harley-Davidson is and why it’s a trade-war target



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‘We are tired of people asking us about target prices’  

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In November, Lee cut his price target from $25,000 to $15,000. A key driver for the revision was bitcoin’s “break-even” point, the level at which mining costs match the trading price.

Bitcoin is closing out a miserable trading year. The cryptocurrency is down 75 percent since January, trading near $3,324 on Thursday, according to data from CoinDesk. From its high near $20,000 in December, the cryptocurrency has lost more than 82 percent of its value.

For bitcoin to stage a price rebound, Lee said user adoption needs to increase, and it needs to be embraced as a real asset class.

But looking out longer term, if the amount of bitcoin users approached even 7 percent of Visa’s total 4.5 billion currently, Lee’s regression model would place fair value at $150,000 per bitcoin.

“Hence, the risk/reward is still strong,” Lee said. “Given the steep discounts of [bitcoin] to our fair value models, the excessive bearish sentiment about fundamentals does not seem warranted.”

Still, Lee said technicals remain important in cryptocurrency trading and as long as bitcoin remains below its 200-day moving average, investors will likely still stay bearish.



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