Rapidly escalating trade tensions between the U.S. and China, along with other developments, made for a busy week in the technology, media and telecommunications space for the week ended Aug. 2.
U.S. President Donald Trump rattled markets when he announced Aug. 1 that he would impose a 10% tariff on $300 billion of Chinese goods, effective Sept. 1. Trump further warned that the rate of the new tariffs could rise to 25% and "well beyond," depending on how trade talks go.
Apple Inc. was among the stocks impacted by the ongoing U.S.-China trade dispute. The company, which had seen its stock price jump earlier in the week following a better-than-expected earnings report, saw the majority of those stock gains erased following the latest tariff announcement, as the company previously warned in a June letter that the proposed tariff list for the latest $300 billion in products included "all of Apple's major products."
Wedbush Securities analyst Daniel Ives said in an Aug. 1 research report that the White House's most recent tariff announcement casts a "dark cloud" over Apple's future in China. If Apple is forced to fully absorb the planned tariff, that could negatively impact the company's fiscal year 2020 EPS figures by approximately 4%, the analyst predicted.
Around midday Aug. 2, Apple stock was trading at $203.19, down 2.19% for the week.
Turning to DISH Network Corp., shares in the satellite company tumbled this week as analysts expressed concerns about potential ramifications of the company's $5 billion deal with T-Mobile US Inc. and Sprint Corp.
As part of its conditional approval of T-Mobile's pending merger with Sprint, the U.S. Department of Justice required the wireless carriers to divest myriad wireless assets to DISH. Specifically, DISH will pay $1.4 billion for Sprint's prepaid businesses and $3.6 billion for 14 MHz of Sprint's low-band wireless spectrum, among other holdings.
DISH plans to use these acquired assets to support its build-out of a next-generation 5G network, an investment that DISH Chairman Charlie Ergen said will cost an additional $10 billion.
MoffettNathanson pay TV and telecom analyst Craig Moffett downgraded his rating on DISH to "sell" from "neutral," noting that DISH's option for selling its spectrum holdings — an option that had previously supported the company's stock price — is now all but gone. As part of its proposed agreements with the federal government, DISH has committed to not selling its primary existing spectrum licenses for six years.
"Over the coming year, investors will be forced to replace ... spectrum valuations with [discounted cash flow]-based valuations of DISH's new wireless business. We're hard-pressed to imagine a scenario where that leads to higher prices," Moffett said.
Other analysts mulled whether DISH can really afford to buy more wireless assets and build a wireless network.
Considering DISH's total debt load of $15.84 billion as of the end of the second quarter, Fitch Ratings Director Patrice Cucinello said that after the Sprint/T-Mobile deal, "DISH is ever more in need of finding a strategic or financial partner to fund its wireless strategy."
As of midday Aug. 2, DISH shares had lost 18.12% in value since their July 26 close and were trading at $32.35 apiece.
Switching gears to social media, Twitter Inc. shares continued to gain ground into this week after the company exceeded Wall Street's expectations during its earnings report July 26.
The company reported a 14% year-over-year jump in users during the second quarter as executives addressed efforts to improve the "health" of conversations on the social media company's main platform.
Worldwide monetizable daily active users totaled 139 million at the end of the second quarter, up from 122 million a year earlier. U.S. users accounted for 29 million of the total, up 10% year over year.
Twitter CEO Jack Dorsey said on a July 26 earnings call that technologically driven enhancements designed to flag problem content have resulted in an 18% reduction in reports of suspicious behaviors.
Twitter shares were trading at $42.12 around midday Aug. 2, up 1.45% from their July 26 close.