Investors should not make any knee-jerk reactions to Apple’s stock worries but should be braced for more FAANG volatility.
That’s the view of Christopher Dewdney, principal at Dewdney&Co, who believes a bigger problem is an “extremely emotional” market - that’s running largely on speculation - being dragged down by tech trauma.
But it’s not just Apple CEO Tim Cook’s note to shareholders that caused a tremor in the markets, it was also the ongoing trade standoff between US and China, and how Apple’s sales slump in the latter played into fears of a global economic slowdown. Dewdney agreed that Apple is merely part of the bigger picture.
He told WP: “All this talk of trade barriers and tariffs was never a good idea. We live in a global economic system and environment and there was always going to be consequences.
“At first we were talking about steel tariffs, then US farm goods, poultry and pork, and now we have got into the big leagues and we’re talking about some of the largest companies in the world, specifically Apple, being affected by this.
“Absolutely it’s a concern, but I think in the long run it could be a good thing because this is going to bring people to the table; Trump and China’s Xi Jinping. This needs to be resolved.”
Honing in on Apple, Dewdney said its problems run deeper than a drop in sales expectations and the impact of a trade war, adding that profits have been driven largely by unsustainable price hikes. He also believes they haven’t produced anything new and exciting since co-founder Steve Jobs died.
Dewdney warned against lumping all the FAANG companies together, however, and said they have different stories to tell, which makes Apple’s recent news more pertinent.
He said: “In the near term, I would expect continued volatility but they each have a different story to tell. When you talk about Netflix and Facebook, Netflix actually, and this is to Apple’s demise, have recently discontinued their subscription basis through iTunes which experts project could result in about $200 million loss in revenue.
“Netflix is also producing more unique content which is doing well. Bird Box had 25 million viewers in the first weekend so their growing whereas Apple hasn’t produced anything new since Steve Jobs died – evolution not revolution. How many times can you update an iPhone or iPad; there’s issues there.”
However, despite these worrying signs, Dewdney advised investors not make any hasty decisions in terms of your tech and Apple exposure. Most people who have held it for some time will have made a healthy profit, although a re-assessment is never a bad thing.
He said: “I might want to re-evaluate my long-terms holding position on a go-forward basis but I’m not one for knee-jerk reactions and it would be on a case-by-case basis depending on the make-up of your portfolio and your time horizon.”
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