Shares of Apple Inc. dropped more than 3 percent on Monday, one day ahead of the company's fiscal 4th quarter earnings report. One of the primary sources of concern for Wall Street was China, a recurring theme for Apple, though the company has turned in excellent results in China every time the alarm bell has sounded.
$AAPL Chart for October 26th, 2015
Source: Yahoo! Finance
Consensus estimates are for earnings per share (EPS) of US$1.88, with revenues of $50.9 billion. Apple guided for revenues between $49 billion and $51 billion, with gross margins between 38.5 percent and 39.5 percent. In the year ago quarter, Apple reported revenues of $42.1 billion with EPS of $1.42.
In other words, Wall Street expects Apple to post significant gains—and has already priced those gains into the stock—but is now worried about just how good those gains will actually be. The reason for that worry is China, Apple's second biggest market.
That's because China's economy has been in a bit of a slump and Apple sells devices that are substantially more expensive than competitor products. Throughout 2015 that has proved no impediment for Apple, but like nervous hens worried that tapping sound is a fox come to prey on them, they've hedged their bets by doing a little pre-announcement selling.
Shares of $AAPL ended the day at $115.28 per share, down $3.80 (-3.19 percent), on heavy volume of 66.2 million shares trading hands.
Drexel analyst Brian White isn't having it, though. On Monday Mr. White iterated his "Buy" rating on $AAPL, predicting Apple could beat his own estimates of $52.4 billion in revenue and $1.88 EPS. He said that Apple was in the midst of a "transformational super cycle," that Apple's Chinese supply chain was robust compared to the rest of the economy, and Apple had "significant upside potential." He maintained his price target for the stock at $200.
*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.