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Apple Seems Stuck

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Apple Inc (NASDAQ:AAPL) has faced the latest threat to its stock as The Trump administration banned Huawei from buying parts from U.S. companies without the government’s approval. As a result, Apple’s stock tumbled nearly 6%. Last week was Apple’s worst for the year, with shares sliding 6.9 percent as concerns over a trade war mounted.

But Apple has faced yet another blow from the US Supreme Court.

Apple already started the year with a  severe slowdown in iPhone sales in China. And even more Chinese consumers are likely to switch away from the American hardware maker after President Trump’s recent executive order. This move can not only severely hurt the U.S. suppliers that sell their parts to the telecom giant but the ban could also make international technology companies such as Apple particularly vulnerable to retaliatory measures from Chinese trade authorities.

High pricing last year led to falling demand. Higher prices were introduced because consumers tend to hold on to their phones a longer period of time causing iPhone sales to slow down after many years of favourable growth. To adjust to the decreased demand, Apple has raised prices on its newer iPhones, while pushing for more service revenue through subscriptions and its App Store. And this made its consumers mad and triggered the second hit. Consumers of Apple’s iPhone are now able to pursue an antitrust lawsuit against the company. Consumers sued Apple for abuse of monopoly power. Users of the company’s iPhone claim this abuse of market power has resulted in inflated prices that are passed onto consumers. The 5-4 vote in the U.S. Supreme Court ruled that this antitrust case brought by iPhone consumers against Apple could move forward. The case centers on a 30% commission that Apple takes on sales of iPhone apps in its App Store, which plaintiffs are arguing pass on to consumers in an unfair use of monopoly power. Apple has argued that only developers can raise such a case, but The Supreme Court wasn’t convinced of Apple’s argument and its ruling decided otherwise.

After last year’s devices effectively saw a price increase, consumers pushed back, and when a China slowdown hit, being its second largest market, the company was forced to warn that holiday period revenues would miss prior guidance. So far, tariffs have had a relatively limited impact on Apple thanks in part to CEO Tim Cook’s lobbying. The iPhone-creator has managed to avoid the impact of last fall’s tariffs because laptops and mobile phones were exempted. But higher tariffs on a broader range of goods may bring a new level of financial pain to the company. While the impact of previous tariffs has been “minimal” to date, Apple will surely be one of the mostly affected when it comes to tangling with exposures of Chinese exports to the U.S., as the final assembly for many of its consumer devices is located in China. It is for this reason that Apple has since been identified as the biggest potential loser in any US-China trade tensions.

Shares of Apple have fallen more in May than the S&P 500 so analysts are worried for a good reason. And Apple stock is still down 6.8% in May which is about 3 percentage points more than the S&P 500.

It’s been a bumpy ride for Apple and Google’s (NASDAQ: GOOGL) latest phone should be a wakeup call. Apple’s widely ridiculed launch of its credit card in March marked the beginning of a horrendous period for the company. This product launch hinted at signs that once a pioneer in innovation is now struggling to innovate in a saturated marketplace.

But both of the above situation can go either way. If the Supreme Court rules in Apple’s favour and the US-China trade conflict doesn’t escalate, Apple has much less to worry about. But if the scenario goes the other way, things are not looking good. And it could be months before any of these two issues are resolved.

U.S. Supreme Court and Chinese trade authorities pose growth challenges to both its hardware sales and its growing services revenue and Apple still has a big issue to tackle – its lack of innovation.

What happens next for Apple stock will also offer valuable insights to the health of the overall market. Many analysts believe that if Apple goes, so will the market as in the past, its stock has served as a great proxy for investor sentiment.

Apple’s former head of retail, Angela Ahrendts, has left unexpectedly in April and joined Airbnb which is preparing for its IPO. According to Apple’s proxy statement from January this year,  Ahrendts was one of the highest-paid employees at Apple with a total compensation of $26.5 million in 2018. She is now the third independent, non-affiliated member of Airbnb’s Board of Directors. The question is raised whether Ahrendts left a sinking boat in the light of Apple’s performance that show  that the Silicon Valley pioneer is undergoing a slow and quite painful transition from being a hardware-based business to a services-oriented organization.

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Earnings

Toyota’s News: Redesigned Corolla, New Investments and Partnerships

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Toyota Stock Market News

Toyota Motor Corporation (NYSE: TM) is managing something other automakers only dream of. The company is honouring its values while achieving sustainable growth for over a decade. The dependable Japanese giant continues to deliver on its promises as it prepares for an electric future.

A new sturdy yet sporty Corolla

On September 17th, the company announced a completely redesigned Corolla that now goes beyond just being a practical buying decision. The newly evolved Corolla has a sporty design, offering pleasurable driving and advanced safety equipment. Being built on Toyota New Global Architecture (TNGA), Corolla is ready to evolve to meet customers’ needs, according to Yasushi Ueda, chief engineer in charge of development.

Since its debut in 1966, this car is nothing less than adored by consumers all over the world and now, it will have its first hybrid version available to U.S. customers.

Hybrid strategy is actually paying off

Just like Honda Motor Co. (NYSE:HMC) with its 2020 CR-V Hybrid, Toyota is using its hybrid technology to position itself for future growth and transition to an all-electric future, despite the fact these energy saving vehicles do not qualify for government subsidies. But, this strategy is paying off as hybrid demand skyrocketed and the company proudly revealed in February that Lexus reached its 10 millionth vehicle sales milestone since its launch, with its 2018 sales performance achieving several ‘best-ever records’. And it is thanks to these figures that the Chinese government is also starting to see the potential of such vehicles so things can only get even better for Toyota. As the saying goes, persistence is the key to success and these two companies have been quite brave in sticking to HEVs.

New Investment – $391 Million Goes to Texas’ San Antonio Plant

This will be Toyota’s first expansion in nine years at the plant that produces its Tundra and Tacoma pickup trucks. It is the part of the company’s strategy to invest $13 billion in its U.S. operations over the period of five years, ending in 2021.

Future Investment – $243.29 million to Produce New Vehicle in Sao Paulo

Toyota is also about to get an even stronger presence in Brazil as it will hire 300 new employees at the Sorocaba Plant to start the production of a new vehicle.

Partnership

And let’s not forget the ground-breaking partnership of Japan’s leading automakers that was revealed in August as Toyota and Suzuki Motor Co. (OTC: SZKMF) announced they will collaborate on developing autonomous car technology. This deal is cementing the bond that the two automakers kicked-off in 2016. They might seem like an odd couple as Suzuki is a everything but a big player, yet its strong presence in India is only one of the things that will greatly benefit Toyota. Although Suzuki admitted defeat on the world’s biggest playgrounds, China and the U.S., it cracked the code for emerging markets. And this is exactly where future global sales growth is expected to come from.

Inventing a car that will run forever?

According to Bloomberg, Toyota aims to go far further than electric by teaming up with Sharp Corporation (OTC:SHCAY) and Japanese governmental organization NEDO that encourages the development of innovative technologies. Considering that Toyota is a company that has even used the economic crisis and recession to only come out stronger, it’s not unlikely that it is set to out do the impossible by mixing the most efficient batteries with solar panels. The company’s strong financial performance and track record show that if anyone can do it, it’s Toyota Motor Co.

 

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Nike Exceeds Wall Street Expectations With Q1 Earnings for FY2020

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Direct-to-consumer sales and digital momentum strategies did the trick for Nike

When Nike (NYSE:NKE) released its better-than-expected first quarter of the fiscal 2020 results late Tuesday. Naturally shares jumped more than 5% to reach $91.80. The reported revenue increased 7.2% year comparing to last year, achieving $10.7 billion, greater than the expected $10.44 billion. Net income soared more than 28%, making adjusted earnings per share $0.86, also smashing expectations of $0.70 per share.

Nike managed to achieve a turnaround

The biggest contributor to total sales was Nike’s North American segment that increased 4% comparing to last year. But China sales also continue to grow and by double digit percentages: 22% to be exact, topping $1.68 billion. Overall, these are fantastic news for investors. Especially since the company’s rare earnings miss for the final quarter of the previous fiscal year. The company attributed this to increased marketing costs and a higher tax rate. But highly anticipated new product launches and solid results for continuing lines, along with efforts to draw new customers to the Nike SNKRS app, did their magic.

Digital momentum is key

Digital movement is transforming and amplifying everything Nike does and in Q1, Nike Digital grew 42% on a currency neutral basis. This growth is driven by enhanced digital services and the international expansion of its app ecosystem. Moreover, The Nike app and SNKRS app are now both live in over 20 countries, with more expansion coming throughout the year.

There are literally no weak spots for investors

Arguably, there are no weak spots for prudent investors to dig in as far as this quarter’s report is concerned. The company is literally firing on all cylinders. The company’s management attributes these results to “the depth and balance of the company’s complete offense, building on the strengths of its foundational business drivers and capitalizing on the untapped dimensions of its portfolio”. Management has also dismissed any concerns that US-China trade conflicts could harm its operations, disclosing no impact has been seen up to date.

Nike showed it can even handle the increased tariffs

Earlier this year Nike joined over 200 other footwear companies urging President Trump not to increase tariffs on footwear imported from China, calling the move “catastrophic for our consumers, our companies, and the American economy as a whole.” But while those tariffs are certainly catastrophic for small players, Nike seems more than capable of mitigating the consequences of this added expense.

Poor macroeconomic conditions are only masking Nike’s true power

The company made it clear that its figures would have been even stronger had it not been for macroeconomic challenges which are manifesting through tariffs and foreign-exchange rates. They implied that the weakening economic climate is essentially masking Nike’s true strength. And in addition to children, women are also a big opportunity for the company that Nike will continue exploiting. This is why Nike expects better-than-planned growth in its higher-margin NIKE Direct channels and international segments and consequently, its full-year gross margin. One thing is for sure: Nike has turned itself into so much more than a ‘sneaker-company’.

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Apple Will Be Making Its MacBook Pros in the US

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With a newly granted “federal product exclusion,” enabling it to import some Mac Pro parts without paying tariffs, Apple (NASDAQ: AAPL) will be able to save enough money to make US assembly worthwhile. The company announced on Monday that it will manufacture the new version of its Mac Pro desktop computer in Austin, Texas. It’s also a big political win for Apple, since President Trump has for years called on the company to make more products in the US. Tim Cook clearly made a compelling case during his meetings with President Trump. Apple described the decision to keep Mac Pro production in Austin as part of its “commitment to US economic growth.”

Macroeconomic climate is not favourable

The September figures around the world are simply awful. The uncertainty brought on by intensifying trade wars, the outlook for the car industry and Brexit are paralyzing investors, with September seeing some of the worst performance since the financial crisis in 2009, leading many to worry about whether yet another crisis is upon us. On a brighter note, Apple’s stock went up 0.2% after Bloomberg reported that ten of its 15 requests for an exemption from tariffs on imports from China had been approved.

New investments

Apple previously disclosed plans to spend $350 billion in the U.S. by 2023, a figure that includes new and existing investments. Its Apple TV+ is set to launch on November 1, with stars like Oprah Winfrey bringing her famed book club streaming show to the company’s subscription service. Among documentaries that will be released, there will even be a multi-series about mental health, featuring no other than Prince Harry himself. Apple’s subscription service will cost only $4.99 a month and will be available in 100 countries and regions at launch. Also, customers who buy a new Apple device will also get a free year of Apple TV+.

Competitors

Netflix (NASDAQ: NFLX) is still the leader when it comes to U.S. streaming, along with Amazon Prime (NASDAQ:AMZN), AT&T’s HBO (NYSE: T) and upcoming Disney+ (NYSE:DIS), it is certain that competition will be intense. Netflix’s stock has been dropping since July, which was the first time the number of subscribers fell. Moreover, Netflix’s stock price has now officially wiped out any gains it’s made over the year so far and both Disney and Apple have a shot at beating Netflix at its own game.

Apple is still facing impending import duties and innovation difficulties

Let’s not forget that the company still faces import duties scheduled for Dec. 15 that could affect nearly all of its major products including iPhones, iPads, MacBooks and Apple Watches. And more importantly, it is thought by many as facing an innovation problem so it heavily relies on customer loyalty that will continue driving its sales. We’ll just have to wait for November 1st launch of Apple TV+ to see the impact of Apple’s new streaming subscription service.

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