Wednesday's Headlines: Apple Slides As iPhone Demand Wavers

Wednesday's Headlines: Apple Slides As iPhone Demand Wavers

Here were the biggest movers in the MyWallSt shortlist yesterday:

Moving Up ⬆️

2U (TWOU) +6.7%

PagerDuty (PD) +5.1%

Cloudflare (NET) +5.0%

DraftKings (DKNG) +5.0%

StoneCo (STNE) +4.2%

Moving Down ⬇️

Farfetch (FTCH) -2.8%

Howard Hughes Corporation (HHC) -2.7%

Trupanion (TRUP) -2.7%

Coca-Cola (KO) -2.6%

Align Technology (ALGN) -2.5%

Here are the stories that you need to know ahead of market-open today, Wednesday the 28th of September.

Apple Slides As iPhone Demand Wavers 📱

Apple (AAPL) has been forced to pull back on proposed plans to ramp up production of its latest slate of iPhones as demand hasn’t quite reached the levels that were anticipated. Shareholders have responded in kind, with Apple’s stock sliding by over 3% premarket at time of writing. While this is unlikely the sole reason behind the dip as the wider market suffers continued inflationary woes, it marks a notable strategic reversal for the Cupertino-based company.

The Big Tech firm had raised its sales projections mere weeks before unveiling its new flagship phone lineup, with a close to 7% sales boost expected from the previous forecast. Now, the company is bringing production back in line with previous years, with 90 million handsets set to be manufactured in the latter half of 2022.

One potential reason behind the waning demand could be the current economic slump befalling one of Apple’s key markets — China. iPhone 14 sales were down 11% on sales of the previous model just last year. This mirrors a global pullback in demand for consumer electronics, as rising inflation and fears around an impending recession have conspired to slash discretionary spending.

Apple is currently down close to 17% year-to-date, faring better than the benchmark S&P 500 index which is down 24% for the same period. While slowing demand for its flagship product will undoubtedly worry both executives and shareholders alike, it must be remembered that Apple has done considerable work in reducing its reliance on the iPhone. While iPhone sales still account for close to 50% of Apple’s revenue, growing segments such as the firm’s burgeoning services sector offer some much-needed revenue diversification for the firm.

Blackberry Disappoints in Earnings Call 😢

Blackberry is trading down in pre-market trading this morning after a disappointing earnings call in which revenue fell 4% year-over-year. The company is one of the great warning stories of modern times, having dominated the early days of the burgeoning smartphone market before getting eclipsed by the iPhone. However, the business today looks nothing like it did back in 2008 when it was a tech behemoth.

Sitting at a market cap of around $3 billion and down more than 95% from its all-time highs, Blackberry now specializes in cybersecurity, as well as Internet of Things (IoT) software. The original smartphone is now just a distant memory.

The company reported earnings last night for its second quarter of fiscal 2023, with its cybersecurity sales — which make up the lion’s share of revenue — down 7.5% from the same period last year. This led to total sales for the company falling 4% for the quarter. Management expects revenue for the segment to remain flat for the next quarter too as the company faces competition from the likes of Microsoft and IBM.

It was not all doom and gloom, however, with IoT revenue growing at 28% year-over-year, thanks to the expansion of its QNX software for automakers. The growing demand for electric vehicles and connected cars has seen Blackberry add Ford, GM, and Hyundai to its already impressive client list. QNX is now used in over 200 million vehicles worldwide.

Cracker Barrel Profits Fall as Costs Rise 😬

Cracker Barrel is the latest restaurant chain to see profits fall after a steep increase in costs. The company posted an 8% drop in profits, pointing to rising labor and food costs.

Like many restaurants, Cracker Barrel has been at the mercy of rising food costs, forcing the company to raise prices for consumers. However, those price increases have not been able to keep up with the increase in raw materials and wage pressures.

The company brought in revenue of $830 million for the quarter. That was a 6% increase on last year's figures but missed analyst estimates. Comparable store sales increased 6.1% and comparable retail sales increased 3%. The company said it expected revenues to increase between 7% and 8% in 2023. It also said it expects commodity prices to rise 8% in the year, with inflation easing each quarter.

Cracker Barrel said it made the decision not to raise prices in-line with costs in order to protect its value proposition and try to lure customers who are already feeling the pinch of inflation and high gas prices. “We decided to pass on much, but not all, of the cost impact in our pricing,” said CEO Sandra Cochran

Cracker Barrel is a chain of restaurant and gift stores with a Southern country theme operating out of Lebanon, Tennessee. It currently has over 660 company-owned stores and owns the fast-casual Maple Street Biscuit Company. The company is highly-reliant on summer travelers and in the past has failed to appeal to younger demographics. The stock is currently down 24% this year.

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