Fear that sales of Apple’s new iPhone X won’t be as stellar as hoped, the company’s stock took a turn for the red Friday, making it the worst-performing stock on the Dow for the day as shares slipped more than 1 percent from the beginning of the year.
The sentiment shifted after a Morgan Stanley note on Friday morning predicting that iPhone sales will not only fail to meet expectations but will come in 10 million below what Wall Street envisioned.
Apple shares fell 4.1 percent right after Morgan Stanley’s note, and by 2:03p.m. EST, shares hadn’t managed to pare much loss.
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Morgan Stanley analyst Katy Huberty said: "We expect Apple to report an in-line March quarter but are cautious into earnings on May 1 due to our belief that June quarter consensus estimates need to be revised lower."
In line with this, Morgan Stanley lowered June quarter iPhone unit estimates to 34 million, down from 40.5 million, while average forecasts were closer to 43 million.
The expectations now are that Apple will hit problems with its suppliers and weaker-than-expected data from China will also take its toll. Key among supplier problems is weak guidance from Taiwan Semiconductor Manufacturing, a top Apple supplier.
In earnings this week, TSM warned of “mobile softness” and “continued weak demand”.
There is also uncertainty as to whether LG will be able to fill Apple’s OLED screen supply needs in time. Related: Farmers On Edge As Trade War Hits U.S. Grain Shipments
But the Morgan Stanley note was nothing compared to another prediction that this year will be the last year of the iPhone X.
Analyst Neil Campling of MIrabaud predicted the iPhone X would be discontinued this year, citing “the declines in iPhone X orders and the inventory issue at TSMC at record highs which basically reflect a need to burn off inventory”.
“Why?” Campling posed, as reported by CNBC: “Because the iPhone X is dead.”
Not that many would agree with Campling.
Speaking to CNBC, Patrick Moorhead, president of Moor Insights and Strategy, said Apple might update the iPhone X, but not kill it, criticizing Campling for not making sense.
“The iPhone X was Apple’s most expensive phone and the company sold, in units, more than any of its other phones, so I’d say it’s a success. […] The suppliers impacted have likely been replaced with another supplier so their numbers are going down.”
But there’s also a bigger picture here: Smartphone sales across the board are stagnating, and it has nothing to do with supplies. The International Monetary Fund says the global smartphone boom has already peaked.
That means for Apple, too. According to Bloomberg, analysts only expect Apple to sell 3 percent more smartphones this year than they did last year. That gets worst in 2019, when the expectation is only 1 percent more.
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Apple reports its earnings on May 1, and until then, analysts will be scrambling to get on top of the wider situation and we may see more forecast dumps.
By Michael Scott for Safehaven.com
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