Apple Inc. (NASDAQ:AAPL) stock rallied on Thursday after a sudden downturn early this week as investors began to worry that the iPhone X isn’t doing as well as initially thought. However, the gap between the bull and bear cases for Apple stock appears to be widening, as the company received a rare downgrade for growing caution about iPhone X sales as some analysts warn that the high price tag is keeping consumers away.
Meanwhile, other analysts insist that the price tag doesn’t matter, and the iPhone X really is selling as well as expected.
Growing caution around Apple stock for iPhone X
Wells Fargo analyst Aaron Rakers waded into the fray with a note on Wednesday afternoon, adding his analysis of mobile phone export data out of China. He found a 17% year-over-year increase in total mobile phone exports from China in November and a 5% increase for October and November combined. He added that exports from iPhone-focused provinces were up 18% year over year on a USD basis for November but less than 1% for October and November combined.
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The timing of Apple’s iPhone releases this year is a major factor because historically, October has been the peak month for exports, but this year, the iPhone X wasn’t released until November. Exports from Zhengzhou Customers, which is the largest iPhone shipment port, were up 17% in terms of dollars in November, but down 8% in units, likely because of the iPhone X’s high price tag. Looking at the top three ports for iPhone shipments, total mobile phone shipments in November were down 6% in U.S. dollars and down 2.5% in units.
No iPhone upside for Apple this year
Excluding China, he now pegs iPhone shipments in the low- to mid-60 million, which would be right in line with the 63.4 million iPhones Apple shipped during the fourth quarter of 2016. He added that this implied shipment estimate leaves about 15 million to 20 million iPhone shipments in China, compared to 14.9 million in last year’s fourth quarter. However, he views this as being “optimistic,” so he sees limited or no upside potential to his estimate of 81.2 million iPhones for the December quarter.
Data from China’s Ministry of Industry and Information Technology indicates a 6% year-over-year decline in “non-China branded smartphones” for October and November. Meanwhile, implied non-Android smartphone shipments were down by more than 30% year over year for those two months, Rakers added.
Apple said to cut iPhone X sales projections
The big factor weighing on Apple stock this week continues to be iPhone X sales, as some analysts try to do damage control in the wake of reports about weak iPhone X shipments. On Wednesday, Nikkei added to the concerns with an article suggesting that industry observers believe Apple has slashed its iPhone X sales expectations.
For Apple stock, Wednesday’s report only compounded the concerns raised on Monday by the Economic Daily. The Taiwan-based publication reported that Apple had slashed its sales forecast for the March quarter from 50 million to 30 million iPhone X units because sales have been weak.
Nomura Instinet analysts recently downgraded Apple stock because of growing concerns about iPhone X sales. The Nomura team now estimates only 35 million to 38 million iPhone X units for the arch quarter but warned this week that this projection could decline to between 30 million and 33 million units.
Apple stock bulls fight back
On Wednesday, UBS trader Art Cashin told CNBC that negative headlines around iPhone X sales had “cast a shadow over everything,” but he added that we will have to wait and see whether Apple stock can shake those headlines off and rally again. As of early Thursday, Apple stock had flipped into the green.
The day before Cashin’s comments, Rosenblatt Securities analyst Jun Zhang contradicted the reports that iPhone X sales are weak. He said in a note that he believes the media reports out of Asia are “confusing the market” because he believes they’re actually referring to production cuts for the iPhone 8 and 8 Plus, which had been reported previously. He also said that they’ve found signs of “no further order cuts” for Apple following the holiday season, especially in terms of the components used to make the iPhone X. He also called attention to reports that iPhone X sales in China have surpassed those of the iPhone 8 and 8 Plus there combined.
Apple stock still top pick for 2018
Morgan Stanley analyst Katy Huberty said in a note last week that the iPhone X was accelerating the company’s share gains in China, citing her firm’s data indicating that Apple has a growing share of the active smartphones there. She also highlighted signs of accelerating switching rates to Apple.
Huberty summed up by saying that Apple stock remains her top pick going into 2018. She explained that the recent performance of Apple stock lags behind its performance around previous “supercycles,” which she said means there could be plenty of runway for Apple stock “as China, ASP, margin, and tax reform catalysts play out.”
Apple stock ticked higher in early trading on Thursday, rising by about 0.5% to as high as $171.85