In early morning trades shares of Apple Inc. (NASDAQ:AAPL) dropped 3 percent as analysts issue reports about shipment concerns for the first quarter of next year. Analysts at Jefferies and UBS both say they expect lower demand for the iPhone early next year.
Apple Inc. (NASDAQ:AAPL) shares continued their downward trend today, dropping another 3 percent in early morning trades. Meanwhile, analysts from Jefferies report that component suppliers for the iPhone have suddenly seen their orders cut within the past day or two.
Shares of Apple Inc. (NASDAQ:AAPL) are trading around $514 per share, a significant decrease from the end of September when shares were trading around $660 per share. Just a few days ago Apple’s stock was trading for more than $540 per share. So why are we suddenly seeing this stock plummet after its brief recovery from decline?
One reason analysts at Jefferies cite is the sudden cuts in component orders for the iPhone. This is something that has happened within the last two days. They believe that the cuts were because the inventory from the fourth quarter is still being worked through. They are leaving their fourth quarter estimates for iPhone units sold unchanged, because they say demand for this quarter seems to be solid. However, they cut their Q4 Gross margin forecasts from 40.0% to 39.0% (Street is at 38.6%). They also have cut EPS and revenue estimates.
However, they do foresee a potential problem with demand in the first quarter of next year. They have cut their estimates for first quarter iPhones from 52 million units to 48 million units. Jefferies analysts are also reiterating their buy rating on shares of Apple Inc. (NASDAQ:AAPL) because they feel the stock is dramatically under-priced. They have set their price target at $800.
Of course, not all analysts agree on the specifics. Those at UBS Investment Research cut their target price from $780 to $700. Like analysts at Jefferies, they also believe shipments for both the iPad and the iPhone will be lower during the first quarter of next year.