It looks like Tuesday might be another rough one on Wall Street. At the very least, things are going to be messy at the open.
Tech is on the frontlines again, with Apple and QQQ slumping in the premarket, extending Monday’s egregious declines.
Not helping matters on Tuesday is Goldman, who slashed their price target for Apple late Monday, partially in response to The Wall Street Journal article which confirmed the company has indeed cut production orders over the past several weeks for all three of the new iPhone models.
But that’s not the only problem Goldman sees.
“In addition to weakness in demand for Apple’s products in China and other emerging markets it also looks like the balance of price and features in the iPhone XR may not have been well-received by users outside of the US”, the bank writes.
Goldman goes on to flag what the bank says is “material risk” to March quarter guidance in the course of cutting their price target on the shares to $182 from $209.
In the note, the bank lays out a series of other issues. “While it now seems that Apple may have miscalculated on the price/feature balance for the XR, we also believe that severe Chinese demand weakness in late Summer and a stronger USD were unexpected headwinds for the company that were difficult to predict”, Goldman goes on to write, before delivering the following rather stark assessment:
The laboratory of the market now points to Apple being at the limit of their price premium for the iPhone. In our experience with mobile phones, when pricing power is lost, consumer technology companies tend to either lose margins or market share or both.
Uh oh – nothing good about that.
And there’s nothing good about the following visual either. Long story short, Target and Boeing are getting smoked in the premarket.