It’s difficult to separate the success of Apple Inc. (NASDAQ:AAPL) from the success of the latest iPhone. When the iPhone X was the most hotly anticipated gadget of 2017, AAPL stock soared.
Now, on reports that iPhone X demand is lower than expected, AAPL stock is taking a beating. In pre-market trading, AAPL stock is down over 2.5%, knocking nearly $23 billion off the company’s market capitalization.
Apple’s suppliers are also getting hit by the reports of poor iPhone X sales. Hon Hai Precision Industry Co., Ltd (OTCMKTS:HNHPF) –or Foxconn to you and me– is down 2.4%.
Report Says Apple Cutting iPhone X Sales Forecast by 40%
CNBC and other outlets picked up a report that appeared this week in Taiwan’s Economic Daily. The Taiwanese newspaper reported that Apple was slashing its quarterly sales forecast based on lower than expected iPhone X demand.
According to the Economic Daily’s sources, Apple had told suppliers to expect 50 million units this quarter, but based on slow sales has now revised its iPhone X sales forecast down by 40% to just 30 million units.
Naturally, that report has immediately hit AAPL stock, but its suppliers may have things even worse. Foxconn and Pegatron are both down, while Genius Electronic Optical Co. Ltd (which makes iPhone X camera lens modules) has seen double-digit loses this week.
Why the Faltering iPhone X Demand?
The iPhone X has been perhaps the most challenging new iPhone to predict since the original was released in 2007. In the lead-up to the new iPhone’s release, AAPL stock experienced monster growth, up over 40% between the start of the year and the Oct. 27 launch of iPhone X pre-sales, a milestone market by a promisingly quick sellout.
However, along the way there were reports of technical challenges that resulted in production delays. There was backlash against the dropping of Touch ID for Face ID. There were concerns that the new iPhone lacked killer new features, with the iPhone 8 offering most of the same capabilities — other than Face ID and the ability to use Animoji.
With Alphabet Inc.’s (NASDAQ:GOOGL) Google Pixel Plus issues, there were worries the iPhone X may also run into problems with its new OLED display. And above all, there was concern that the iPhone X price –starting at $999– would scare potential buyers away.
There was never any doubt that hardcore Apple fans would snap up the 10th anniversary iPhone X, but the big question remained: would everyone else embrace the new flagship and upgrade, or would iPhone X demand drop soon after launch?
The Economic Daily report suggests that the latter scenario seems to be playing out, with iPhone X demand falling far short of Apple’s expectations. Among the potential issues listed above, Reuters has been analyzing Chinese social media and discovered interest in that country in the iPhone X has fallen off significantly and is currently running at less than half the levels of the iPhone 6 in 2014.
That being said, iPhone X demand remains somewhat of a mystery and not everyone is convinced that the sky is falling. While some analysts have not been convinced by the upgrade supercycle theory, others are convinced iPhone X sales are going to knock it out of the park. As late as last week, Reuters notes that Loop Capital was estimating quarterly iPhone X sales of 40 million to 45 million units, while Jeffries was calling for 40 million.
Of course, we won’t know for certain who is right until Apple officially reveals iPhone sales at the end of January. Even then, the company doesn’t always break out the model mix when it releases the number of units sold, so iPhone X demand may still be a guessing game.
In the meantime, expect a potential roller coaster for AAPL stock as conflicting iPhone X sales predictions start to trickle in…
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.