"The question for investors will be the extent to which Apple's aggressive pricing has exacerbated this situation and what this means for the company's longer-term pricing power within its iPhone franchise", said James Cordwell, an analyst at Atlantic Equities.
Suppliers in Europe and Asia slumped on the news. In China, there were less than 100 million smartphone shipments in the first three months, and the second quarter saw a 5.9% year-over-year decline. "Blaming macro weakness and trade concerns is obfuscation". The stock has dropped from its all-time high of $232.07 per share back in October, to its current trading price of just ~$143.84 per share. Concern about the pace of growth in China, the impact of the USA tariff war and the general state of technology valuations all got an airing in the reaction to Apple's warning. A functional iPhone 7 Plus with the same amount of storage can get a trade in value of 1939 yuan ($282).
"We were surprised about the magnitude of the miss and the negative impact of China demand for iPhones", wrote Citigroup Global Markets Inc. analyst Jim Suva. Apple shares are down 9.27% in midday trading on Wednesday at $143.28.
Cook said the new iPhone models were released earlier than the flagship iPhone X last year, which created a hard year-over-year comparison. Analysts see it as a result of slow sales volume of the new iPhone Xs and XRs since their launch in September.
Still, some local players managed to grow against the trend and they may be eating into Apple's market share.
After Apple cut its Q1 revenue forecast by $9bn, CEO Tim Cook reminded employees in a memo obtained by Bloomberg that there are still some bright points, including a record number of new iPhone activations in the United States and Canada on Christmas day.
The CEO attributed much of the company's "shortfall" in its outlook to struggles in China that he pinned on the economy and "rising trade tensions" with the U.S. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. There are likely many others, too, that will be forced to announce lower-than-expected earnings, according to the chairman of the White House Council of Economic Advisers.
"This is just another little tea leaf as to the goings on behind the curtain in China and last night's PMI coming out weaker than people thought", said Kevin Caron, a senior portfolio manager at Washington Crossing Advisors.
Apple's warning couldn't have come at a worse time for stock market investors given the wipeout in late-2018, when many global indexes posted their worst performances in a decade amid concerns about the global economy and the prospect of further USA interest rate hikes.
Chief Executive Tim Cook blamed weak demand in China as President Trump's trade war escalates.