Apple Stock Falls Ahead of Earnings as Samsung, Google Warn of Smartphone Issues

Samsung sees a ‘likely stagnant smartphone market’ in the second half of the year

Apple Inc. is about to give its take on smartphone demand, but not before its chief rivals painted a bleak picture of the current landscape.

Both Alphabet Inc. GOOGLWealth Strength IndexGOOGL is Moderately Up and trending Up, -7.83% GOOG, -8.00%  and Samsung Electronics Co. Ltd. 005930, -0.65% reported earnings late on Monday, alluding to continued slowdowns in their smartphone businesses.

“Hardware results reflect lower year-on-year sales of Pixel reflecting in part heavy promotional activity industry-wide given some of the recent pressures in the premium smartphone market,” Alphabet Chief Financial Officer Ruth Porat said on the company’s conference call.

She later tried to soften the blow by maintaining that while smartphone sales were down, Google Home smart speakers and other home devices have been demonstrating “ongoing momentum.”

Samsung predicted a “likely stagnant smartphone market” in the second half of the year and described how it’s had to adjust to changing conditions. Robert Yi, the company’s head of investor relations, explained that “the process of revamping our mass-market lineup amid softer overall smartphone demand” prompted a drop in sales volume for Samsung in the latest quarter.

When Apple AAPLWealth Strength IndexAAPL is Moderately Flat and trending Up, -1.88%  reports earnings this afternoon, a key focus will be on the company’s performance in China, after challenges there prompted the company to report a disappointing holiday quarter. Apple has cut prices in China as a result, but Samsung’s commentary suggests that the issues in China aren’t product specific, with Vice President Sang-Hyun Lee informing investors that the first quarter marked the start of “weak seasonality” in the region.

Analysts are divided on what Apple’s China numbers will show, as Credit Suisse’s Matthew Cabral predicts that the company won’t be able to show “meaningful improvement” until it launches 5G iPhones in 2019. Morgan Stanley’s Katy Huberty is more upbeat, writing of her expectation that Apple saw “further iPhone stabilization in March.”

Apple shares were down 1.8% in afternoon trading Tuesday, while Alphabet shares were off 8.3%.

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