Weak iPhone 6s Demand Sends Apple Stock Sliding

Shares of Apple’s stock (AAPL) took a mild hit Tuesday, as reports began to surface about the iPhone maker having cut its next two quarters worth of components orders, a move that may suggest the demand for the company’s iPhone 6s is actually weaker than expected.

Credit Suisse analyst, Kulbinder Garcha, in a note to investors indicated that recent checks with Apple’s Asia supply chain revealed weaker iPhone orders than previously expected. Surprisingly enough, almost immediately following the note’s release, Apple’s stock dropped, ultimately closing at $117.34 — down from $118.73 for the day.

iDrop_WeakiPhone6sDemand_01“In our view,” wrote Garcha, “the continued weak supply chain news could weigh on Apple shares for the next few weeks/quarters. Unexpectedly low iPhone 6s demand appears to be driving the cuts.”

Over three weeks ago, Credit Suisse issued a very similar report, indicating that Apple had cut supply chain orders due to weak iPhone 6s demand.

Credit Suisse’s advisors in Asia reportedly confirmed a decrease in orders for November; build estimates of around 75 million units for the December quarter and 50 million for the spring quarter. Garcha still maintains sales estimates of roughly 78 million iPhones for December and 55 million for March — a total of 222 million units for the 2016 calendar year. Surprisingly, although the numbers are still much lower than Wall Street initially speculated, Garcha believes Apple will eventually expand the iPhone consumer base to upwards of 615 million units.

Garcha also echoed the earlier sentiments of a rumored 4-inch “iPhone 6c” in the spring quarter, estimating that the smaller device could potentially reflect up to 4 million units sold for Apple.

According to Garcha, “We note that Apple’s recent guidance and purchase obligations suggest our iOS units have 25% upside — providing further evidence that Apple will launch a 4-inch device.”

First to speculate about Apple launching a revamped 4-inch iPhone sometime in 2016 was KGI Securities’ analyst Ming Chi Kuo. Kuo’s prediction gained traction as subsequent reports began to pour in that confirmed his claims.

Even despite the lowered iPhone estimates, however, Credit Suisse issued an Outperform rating for Apple (AAPL), setting a price target of $140.00.

Comments

Most Popular