Apple to cut iPhone X production target by half: Report
The growing concern about weak sales of iPhone X is making investors jittery about the company’s financial outlook.Updated: Jan 30, 2018 10:46 IST
Poor sales during the Holiday season and various other factors have forced Apple to halve its iPhone production target to around 20 million units, Nikkei reported on Monday. The target has been reduced for the first three months of the year, the report added.
The report added to growing concerns about weak sales of the $999 phone, making investors jittery about the company’s financial outlook when it reports first-quarter results on Thursday.
Apple’s shares fell to their lowest level in 2018, knocking off $14 billion from the company’s market value. The company declined to comment.
Analyst Toni Sacconaghi of Bernstein cut both his second-quarter and full-year forecasts for iPhones but said he did not expect Apple’s 2018 profit to fall steeply because of changes to US tax law that will bring the company’s rate down to 18 percent.
“Apple earnings should handily beat December quarter expectations, but March guidance could moderately disappoint,” UBS analysts said.
The production cut was prompted by slower-than-expected sales in the holiday shopping season in Europe, the United States and China, the Japanese newspaper reported, without citing a source.
The iPhone X was the first phone to sport a new design since the launch of the iPhone 6 in 2015 and many expected it to lead to blockbuster sales, dubbed by Wall Street analysts as a “supercycle.”
“This was supposed to be the supercycle year and if Apple hasn’t been able to drive substantial unit growth this year, then that makes you a little cautious on future iPhone cycles,” Atlantic Equities analyst James Cordwell said.
Several analysts have lowered their estimates for iPhone X shipments in the past few weeks, citing the high price of the device and other factors, with at least three downgrading their rating on the stock.
Sacconaghi of Bernstein had originally predicted that Apple would outpace Wall Street expectations of 62 million iPhones by selling 66 million units, but on Monday he cut that figure to 53 million units, a nearly 20-percent cut. He also cut his full year iPhone unit forecast 11 percent to 220 million units. ALSO READ: Apple might be done with its iPhone X experiment: Analyst
But he only slightly revised his full-year earnings per share estimate for 2018 to $11.80 from $11.87, citing the positive effects of US tax law changes.
Adding to the concerns, Verizon Communications Inc said last week its postpaid device activations were lower than last year as people were keeping phones longer.
A survey of people planning to buy the iPhone showed that the percentage of them looking to buy the iPhone X has dropped to 37 percent from 43 percent in an earlier survey, UBS analysts wrote in a note on Monday.
Asian supply chain checks suggest that iPhone X orders have been weakening recently, with first-quarter production likely to be about 20 million units, JP Morgan analysts wrote in a note dated Jan. 24.
A few of Apple’s iPhone parts suppliers are based in Asia. Shares of Foxconn, one of Apple’s main suppliers and formally known as Hon Hai Precision Industry Co Ltd, fell 0.7 percent on Monday.
First Published: Jan 30, 2018 10:43 IST