Former Apple CEO John Sculley says the company has one big problem

Apple’s biggest problem right now may not be managing through a brutal U.S. versus China trade war, but rather dealing with waning demand for its pricey iPhones.

“The bigger problem for Apple is holding onto market share in China because there is a lot of resentment against American products. That couldn’t come at a worse time for Apple (AAPL) because Apple is already seeing a significant slowdown for iPhone sales irrespective of what’s happening in China,” former Apple CEO John Sculley said on Yahoo Finance’s The First Trade.

Sculley served as Apple’s CEO from 1983 to 1993, before being unceremoniously replaced amid a string of challenging quarters. Despite being removed from Apple’s business for some time, the now venture capital investor has been known to critique the tech giant.

An Apple spokesperson declined to comment on Sculley’s remarks.

But those on Wall Street perhaps a bit more plugged into the Apple of 2019 share Sculley’s sentiment. 

RELATED: Take a look at the major retailers that filed for bankruptcy in 2018: 

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Every retailer who filed for bankruptcy in 2018
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Every retailer who filed for bankruptcy in 2018

A'gaci

Women's apparel and accessories retailer A'Gaci filed for Chapter 11 bankruptcy in January. 

Photo credit: Getty

Kiko USA

Cosmetics retailer Kiko USA Inc filed for Chapter 11 bankruptcy protection in January.

Photo credit: Getty

Tops Markets

Tops Markets operates 174 supermarkets — called Tops Friendly Markets. The company filed for bankruptcy protection in February.

Photo credit: Getty

The Bon-Ton Stores

The Bon-Ton Stores owns multiple department store chains including Bon-Ton, Bergner's, Boston Store, Carson's, Elder-Beerman, Herberger's, and Younkers. The company filed for bankruptcy in February.

Photo credit: Getty

Remington Outdoor

Remington filed for Chapter 11 bankruptcy protection in March.

Photo credit: Getty

The Walking Company

The shoe seller The Walking Company, which operates 208 stores in the US, filed for Chapter 11 bankruptcy protection in March.

Photo credit: Getty

Claire's

The jewelry chain Claire's filed for bankruptcy in March.

Photo credit: Getty

Southeastern Grocers

Southeastern Grocers, the parent company of the grocery chains Winn-Dixie, Harveys and Bi-Lo, filed for Chapter 11 bankruptcy protection in March.

Photo credit: AOL

Nine West

Nine West Holdings filed for bankruptcy in April.

Photo credit: Getty

Bertucci's

Italian casual-dining chain Bertucci's filed for Chapter 11 bankruptcy protection in April.

Photo credit: AOL

Rockport

The footwear brand filed for Chapter 11 bankruptcy protection in May.

Photo credit: Getty

National Stores

The owner of the Fallas chain of discount stores filed for bankruptcy in August.

Photo credit: Facebook

Brookstone

Brookstone filed for Chapter 11 bankruptcy protection in August.

Photo credit: Getty

Samuels Jewelers

Samuels Jewelers filed for Chapter 11 with an agreement for bankruptcy financing in August.

Photo credit: Facebook

Toys R Us

Toys R Us filed for bankruptcy in September.

Photo credit: Getty

Mattress Firm

Mattress Firm filed for bankruptcy in October.

Photo credit: PA

Sears

Sears filed for bankruptcy in October.

Photo credit: PA

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On Monday, Rosenblatt Securities snagged a few headlines by downgrading Apple’s red-hot stock (up 29% year-to-date) to Sell. Analyst Jun Zhang wrote that while he doesn't think Apple’s stock is a short, the company will face “fundamental deterioration” over the next six to 12 months.

Zhang added that he thinks new iPhone sales will be disappointing, and expects service revenue growth to decelerate.

“We think fundamentally that iPhone sales won’t see much improvement, and we have more concern for the second half,” Zhang recently told Yahoo Finance. Zhang also thinks new 5G smartphones coming soon from Alphabet’s Google will pressure Apple’s iPhone market share.

Apple sales and EPS estimates slashed

Just a few days before Zhang’s call, Citigroup analyst Jim Suva came out firing again with double barrels on Apple ahead of its July 30 earnings release.

“We remain below street on sales and EPS estimates and expect share price volatility in the months ahead as consensus estimates calibrate lower. Recall we slashed estimates post our Asia trip in May which showed a less favorable brand image desire for iPhone in China and China representing 18% of Apple sales which we believe could be cut in half,” Suva wrote in a July 2 note.

Indeed Suva’s note to clients on Apple from late May got the market’s attention.

Suva slashed his second half 2019 iPhone unit sales estimates by about 7 million due to concerns demand in China. The analyst subsequently reduced his sales and profit estimates “materially” on the company.

“We are proactively slashing our iPhone unit sales as we believe the US/China trade situation will result in a slowdown of Apple iPhone demand in China as China residents shift their purchasing preference to China national brands. Our independent due diligence shows a less favorable brand image desire for iPhone which has very recently deteriorated,” Suva said at the time.

Interestingly, Suva still rates Apple a Buy into earnings day — sounding more keen on the valuation than any near-term re-acceleration in sales or profits.

Warned Suva in his latest missive, “So we don’t see multiple compression but rather see risk that consensus is simply too high. We maintain our Buy rating but expect share price volatility ahead.”

And here comes July 30.

Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow him on Twitter @BrianSozzi

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