Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio)’s top holding, Apple Inc. (AAPL, Financial), tumbled 7% after a slight 20-minute suspension in aftermarket trading on Wednesday following the company’s warning about the potential for lower-than-expected revenues for their fiscal first quarter ending Dec. 29, 2018.
Apple CEO Tim Cook said in a shareholder letter the company expects revenue of approximately $84 billion, down from the guidance range of $89 billion to $93 billion announced on Nov. 1, 2018.
Company highlights two key factors for revenue guidance shortfall
Cook highlighted several reasons for the decline in revenue guidance, including the economic slowdown in China and the timing of new product launches of the iPhone XS and iPhone XS Max: the new product launches of 2018 shipped during the fiscal fourth quarter while the new product launches of 2017 shipped during the fiscal first quarter of 2018. The CEO also underscored how China’s gross domestic product decelerated during the second half of 2018: the GDP growth during the September quarter was the “second lowest in the last 25 years.”
Cook mentioned that “rising trade tensions” with the U.S. further impacted China’s economic environment, resulting in lower traffic in Apple’s retail stores and channel partners throughout the quarter. The declining traffic lead to lower-than-anticipated iPhone revenues for the Greater China region, accounting for most of the company’s year-over-year sales decline and revenue guidance shortfall for the most recent quarter.
Stock falls over 7% in aftermarket trading
Apple traded approximately 7.50% lower than its closing price of $157.92 on the warning.
Other gurus hoping for better news when Apple reports its fiscal first-quarter earnings include Ken Fisher (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Spiros Segalas (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio).
Disclosure: No positions.
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