Technology Stocks May Be In Trouble

Last week Apple Inc (AAPL) shocked the market when it said revenue in its holiday quarter would miss expectations. This news sent Apple shares down as much as 7% after hours and confirmed the market’s biggest fear about the global economy — that trade is slowing down businesses around the globe.In a letter wrote to investors, Apple’s CEO Tim Cook explains: “In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad. China’s economy began to slow in the second half of 2018.

The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. We believe the economic environment in China has been further impacted by rising trade tensions with the United States.” Apple now expects revenue will total $84 billion in its fiscal first quarter, below its initial guidance for revenue of $89-$93 billion the company gave Wall Street back in November. Apple’s stock price has already fallen 33% since the August high of last year, meaning AAPL is officially in a bear market. And there’s no telling how low it will continue to slide.

But it’s not only Apple that is facing headwinds. Alphabet is also playing in the slower growth environment. An increasing number of software companies are looking to bypass the dominant app store gatekeepers at Apple and Google — selling their services directly to consumers and undercutting the tech giants. This would change how most iPhone and Android users discover, download and pay for their apps. In 2016, music service Spotify ended its support for in-app subscription payments.

Most recently Netflix has been leading the charge on leaving Apple’s platform. It plans to cut off a lucrative relationship for Apple when it confirmed that new customers will no longer be able to pay their monthly subscription fees through iTunes. Instead, subscribers are being redirected to make payments on Netflix’s own website.

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