Apple shares have been struggling for months now as analysts and investors bite their nails anxiously as they await the official release about how many iPhones were sold during the fourth quarter. This time there are signs that the company cut iPhone production for a second time, which signals that demand for the smartphone remains weaker than expected and is expected to weigh on the March quarter.

Apple Inc. Gets Hosed Again For Signs Of Weak iPhone Demand

How many iPhones in December quarter?

UBS analyst Steven Milunovich is forecasting 75 million iPhone units for the fourth quarter. Apple will report the official number in its earnings report later this month. The analyst said his iPhone Monitor suggests demand for 70 million iPhones during the December quarter, based on search volumes. He added that as the quarter progressed, demand for the smartphone appeared to decline, thus sending the Monitor estimate downward.

He’s assuming that fulfillment for demand in the September quarter got pushed further out, which is why he’s estimating the slightly higher shipment number. His iPhone Monitor found that global search volume grew 1% year over year, with a 20% decline in the U.S. and a 28% increase in China. However, he added that demand in China seems to be slowing down due to more difficult comparisons, although it does still seem solid. He also said that developed markets are “more problematic” for Apple right now.

Why might Apple be seeing lower iPhone demand?

In considering why demand for the iPhone is so weak, Milunovich suggested that it comes from fewer upgrades rather than fewer new users. In the Fall, he had been predicting growth in the mid-single digits, so it looks like demand might be weaker than he was expecting. The UBS analyst said that in his last global survey, two of the big problems surrounding demand of Apple’s smartphone were that interest in the iPhone 6s lineup is less than interest in the iPhone 6 was last year and upgrade cycles are actually lengthening in the majority of countries.

The latter observation is interesting in light of Apple’s recently announced iPhone upgrade plan. It seemed at first that the company was targeting U.S. users mostly, as many still have two-year replacement cycles through their mobile carriers. Indeed, this is possible, as reducing that cycle would certainly boost demand domestically, which is important due to the maturity of the smartphone market in the U.S. The upgrade program would also do well in other countries, however, particularly those in which upgrade cycles are lengthening.

At any rate, Milunovich states that the reason interest in the iPhone 6s lineup this year is lower than it was for the iPhone 6 last year suggests that there are not enough differentiating features between the two years’ models. He also said that mix might be a factor as buyers may choose the iPhone 6 rather than the iPhone 6s because it is $100 cheaper. Although this doesn’t impact unit numbers, it does reduce the average selling price, even though he also said that buyers choosing models with more storage might offset this, as would contributions from the iPhone 6s Plus.

“Willing to suffer” for Apple

At any rate, the analyst is willing to stick with Apple through these times and has maintained his Buy rating and $130 per share price target for the stock. He said if the biggest problem is upgrade timing, it would be good news. He added that Apple doesn’t appear to be losing share of the market as its brand and ecosystem “have never looked stronger.” For now, he said it will take time to see whether upgrade cycles will either shorten or lengthen with the addition of the installment plans.

Shares of Apple traded down by as much as 3.23% at $97.43, bringing the stock below $100 for the first time in years on a split-adjusted basis. Over the last three months, the stock has declined by more than 10%.

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