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Apple tightens belt as trouble rings in from dull iPhone demand and beyond

Apple will see the growth rate of its Services division decelerate come fiscal 2019, says analyst.

Kamaron Leach 

Apple iPhone
A customer compares the size of the new iPhone XS and iPhone XS Max at the Apple Store in Singapore September 21, 2018. Photo: Reuters

Distress for Inc. continues to mount, and soft demand for new iPhones is only one of its troubles.

will see the growth rate of its Services division decelerate come fiscal 2019, Macquarie analyst Benjamin Schachter said in a research note. The firm slashed Apple’s price target to $188 per share from $222 although it still rates the stock outperform.

App Store, Licensing, and Care are the segment's top three drivers, and Schachter anticipates these areas "will slow in the coming quarters as tough comps and other issues impact growth rates." And unfortunately, the faster-growing business from Music, iCloud and aren’t large enough to offset the downturn, he said.

Following Tuesday’s decline, shares of Apple have rebounded 1.3 percent in early trading.

Soft consumer demand for Apple’s latest devices still remains the biggest thorn in Apple’s side. And the downturn may now be spreading to other areas.

Recent checks “indicate that the woes have begun to affect company finances deep enough” for Apple to trim non-core projects, according to Lynx Equity analyst KC Rajkumar and Jahanara Nissar.

Lynx says weakness in sales is prompting a level of belt tightening. And this is "perhaps the first time in years that Apple is having to resort to a measure of pulling in of non-core development activity in response to weakness in core operations."

First Published: Wed, December 12 2018. 21:31 IST