“Don’t obsess about the svelte new iPhone or the price cut for the Apple Watch,” Jeff Sommer writes for The New York Times. “Don’t worry too much about Apple’s courtroom battles over privacy and national security, at least not now. Those issues moved to the back burner on Monday when the Justice Department said that it might not need Apple’s help to break into an iPhone connected to a mass shooting.”
“Instead, if you’re interested in Apple as the world’s most valuable company, and not just in Apple as a maker of cool gadgets, the biggest news affecting it lately has arguably come from another quarter: the foreign currency markets,” Sommer writes. “For a reading on where Apple’s share price may be heading, look to the dollar.”
“The underlying reason is this: The dollar’s rise and fall have a direct effect on Apple’s earnings, which ultimately drive share prices,” Sommer writes. “When the dollar strengthens, sales of iPhones abroad are worth less in American currency, hurting profits and, sooner or later, knocking down share prices. When the dollar weakens, on the other hand, those overseas profits become more valuable.”
Much more in the full article here.
MacDailyNews Take: Currency headwinds and tailwinds 101.
[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]
Prices are usually adjusted periodically, up and down, to take account of differing exchange rates so it may be less of a problem than the writer suggests.
It’s only less if the dollar declines in value.
If you have to adjust your prices upward to offset declining foreign currencies you lose sales. It’s a balancing act between profits per sale and number of sales. Through 2014 the relative value of the US dollar against a basket of trading partner currencies was 80 – 85. Starting about April of 2015 the dollar’s relative value started a steep climb to over 100, a 25% increase in value. The biggest losers against the dollar were European and industrialized Asian.
Merkel, Germany’s Chancellor, should be in charge of the EU countries’ budgets. If she were the EU wouldn’t be having the economic weakness it is.
Yeah whatever, either way they still make a shit ton of money.
Gee, like every other global company.
Another writer who sticks Apple or even still Steve Jobs in an article title for hits on a meaningless story.
*DING* The perennial abuse of ‘Apple’ click-bait from the hit whores. So predictable, boring and waste of reading time.
I don’t know what he’s talking about. Apple focuses on the products period. If anybody has seen the interviews from both Cook and Jony Ives. They know that economies go up and down and the company has gone through all of these things many times. The stock market on the other hand is full of crap.
They base Apple on there stupidity and not on how well the company is actually doing versus the rest of the world. They look for excuses to make up stories about Apple’s demise any chance they get. Every year they come out and say iPhone sales have peaked. Every year Apple sells more at record levels and they still knock the stock price down. Tim Cook has said that there are more than a billion users of non-smart phone users still out there. Hardly peaked for the iPhone sales.
So, if the dollar falls, my stock is worth more dollars, but those dollars have less value. Is there any gain to be had here?
Great question! Anybody know the answer?
None Whatsoever! You might as well buy Gold lol
I laughed and laughed last night watching a business report on US PBS where some dizzy analyst was suggesting people invest in gold and gold mine stock bundles. The woman interviewing him was suitably skeptical. I just laughed and laughed.
Depends on Where u plan to spend those realized dollors
…The dollar’s rise and fall have a direct effect on Apple’s earnings, which ultimately drive share prices
NOT LATELY! WallNut Street is currently in rehab and can’t keep a coherent thought in its coke psychosis addled pate. (0_o)
Dont forget the supply chain… When dollor strengthens.. Apple buying power strengthens as well. Resulting in lower cost.
So it is not as simple as black and white… It all depends on apples contracts with suppliers and prote tion against currancy moves and their hedging.
The supply chain costs are a tiny part of the costs compared to the margins they make on their products. Bottom line is a lower dollar is good for apple. Its bad effects are offset a little bit by the lower supply chain cost but that is not enough to offset the margins getting clobbered.
Supply chain costs are directly proportional with the mony they make
My wife was going to buy one of the new phones in Oz and baulked at the price $AUS829! She’s buying a iPad instead at “only” $AUS899. It’s still better value than the iPhone.