Apple shares drop as iPhone's sluggish sales raise red flags

Andrew Cummings
November 13, 2018

Apple's iPhone XR, which boasts the iPhone X's edge-to-edge display, is based on older LCD pixels instead of the X's high-resolution OLED screen. If "consumers hold on to their devices for longer, it could materially lower iPhone unit sales each year, undermining company revenues and profits". The company had released the more expensive iPhone XS and XS Max more than a month earlier.

The report noted that Apple's directive translates to about 100,000 fewer iPhone XRs being made each day. "Also, the chances of further tax reform are close to zero, so I don't expect any more material reductions in Apple's reported tax rate", said Forbes' Jim Collins.

Following a poor forecast earlier this month, analysts and investors expressed concerned about Apple's prospects and said its smartphone sales might be stagnating.

Now, that's being backed up by new reports by analysts from JPMorgan and TF International Securities.

Another iPhone component supplier has warned of softer than expected demand for Apple's latest handsets.

Kuo has reduced "his overall iPhone shipment forecasts by 15-20 percent for the first quarter of 2019", notes the report.

He gave three reasons for his lowered forecast, citing negative impacts on consumer confidence from the Chinese-American trade war.

"We think investors should consider Lumentum's updated guide as reflecting as much as a 30% cut in Apple orders", Wells Fargo analyst Aaron Rakers said in a note to clients.

Citi also cut its target on Qorvo on Monday due to iPhone XR weakness. Apple said it preferred to focus on the company's transition to a services company, with regular recurring revenue.

"In addition to more durable iPhone offerings, we worry that the combination of a smartphone market that has gone ex-growth and increased iPhone ASPs, especially relative to the market, risks materially pushing out replacement rates for iPhone", he wrote on Monday, referring to average selling prices.

More recently, Apple launched a new version of its operating system, iOS 12, that supports an unprecedented 28 of the company's devices, including models that went on sale in 2013. "It doesn't matter a lot how many units there are in there in terms of the overall value of what's in the cart".

Jobs, for all his faults, did manage to save Apple with a couple of products which worked - the iPod and iPhone - but even he was running out of ideas before the end (iPads anyone?) and the issue of what to do next was never resolved.

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