The Dow Jones Industrial Average (DJINDICES:^DJI) was down 0.75% at 11:20 a.m. EST Friday as vaccine optimism clashed with the reality of a worsening pandemic over the next few months until vaccines are widely available. Shares of Apple (NASDAQ:AAPL) headed lower despite an analyst predicting iPhone share gains in China, and Nike (NYSE:NKE) stock was down ahead of its quarterly report this afternoon.
Analyst sees Apple gaining share in China
The delayed launch of the iPhone 12 family due to supply chain disruptions stemming from the pandemic hurt sales during Apple’s fiscal fourth quarter. Sales of iPhones were down around 20% year over year as customers awaited the company’s newest devices. While Apple doesn’t break down product revenue by country, overall revenue from China tumbled 29% year over year in the fourth quarter absent an iPhone launch.
Morgan Stanley analyst Katy Huberty believes the iPhone 12 launch has turned things around for Apple in China. Seeking Alpha reported on Friday that Huberty had maintained her outperform rating and $144 price target on Apple stock, citing a strong performance from the iPhone 12 in China.
Huberty believes that the new iPhone is outperforming expectations in China, saying that iPhone unit volume in the fiscal first quarter through November is up about 40% from the prior-year period. This growth is likely leading to significant share gains; Huberty says Apple is likely taking share from market leader Huawei.
Apple’s iPhone doesn’t do nearly as well in China as it does in the U.S. The company had a single-digit market share in recent quarters, according to Counterpoint Research, trailing Huawei, Vivo, Oppo, and Xiaomi. The 5G technology inside the iPhone 12 family could help the cause, but there were already plenty of 5G phones available in China prior to the iPhone 12 launch.
China is an important market for Apple, but it’s also fiercely competitive. Any market share gains could prove temporary as Chinese companies launch new products of their own. Shares of Apple were down about 0.9% by late Friday morning. The stock has gained around 74% this year.
Nike to report results after market close
Footwear and apparel giant Nike is scheduled to report its fiscal second-quarter results after the market closes on Friday. The company has largely recovered from the pandemic-driven sales plunge earlier this year by shifting hard toward direct-to-consumer and digital sales.
In the first quarter, Nike’s overall sales were down just 1% year over year. Weakness in the wholesale business and at company-owned stores dragged down revenue as retail foot traffic was negatively affected by the pandemic, but digital sales soared 82%. Even with the company-owned stores performing poorly, Nike’s direct-to-consumer revenue shot up 12% to account for about 35% of total revenue.
Lower costs helped fuel double-digit earnings growth in the first quarter. Earnings per share of $0.95 was up 10% year over year as the company cut back on demand creation expenses and, to a lesser degree, operating overhead expenses.
For the second quarter, analysts are expecting Nike to report 2.2% revenue growth. The average analyst estimate calls for a decline in per-share earnings, but the range of estimates is wide to reflect elevated uncertainty. Nike blew past analyst estimates for the first quarter, and it could do the same for the second quarter.
Shares of Nike were down about 1.6% ahead of the report. Nike stock has gained about 37% so far this year.