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Goldman Sachs points to 'Rapidly Slowing' iPhone Demand in China and Warns Earnings Could Fall Short

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Goldman Sachs is telling clients that Apple's earnings results may end up disappointing investors thanks to a marked deterioration in Chinese demand for iPhones. "There are multiple signs of rapidly slowing consumer demand in China which we believe could easily affect Apple's demand there this fall," Goldman analyst Rod Hall wrote in a note published Sunday.


Though Hall admitted that the smartphone market in China showed some signs of important in the second quarter, his forecast for third-quarter unit sales shows a decline of 15 percent year over year. While the analyst expects Apple's latest phones — including the larger XR and XS Max — to counter some of the softening demand, the overall decline in phone demand could be costly to CEO Tim Cook's bottom line.


Hall's current projections set Apple diluted earnings per share at $11.78 for the current fiscal year and $13.77 for 2019. Shares of Apple fell 0.3 percent in premarket trading following the Goldman note, set to pare 2018 gains of 31 percent.


Apple's bigger smartphones "could at least partially offset negative macro indications though we doubt it completely solves the problem if Chinese consumer demand continues to be weak as we move through the critical holiday buying season," Hall added.


The analyst said his current December-quarter iPhone unit estimate of 80 million units includes 13 million from China, or 16 percent of total iPhone units. That's down from 19 percent from China in the December 2017 quarter and 18 percent in December 2016.



Read the full CNBC report here.


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