Apple Inc. (AAPL) shares fell 1.2% to $174.25 on Tuesday, Dec. 19, following a report that suggested sales of its flagship iPhone X may not be robust enough to top Wall Street forecasts as customers turn to cheaper models and shun the $1,000 price tag.
Instinet, a division of the Japanese investment bank Nomura, lowered its price target on the tech giant by $10 to $175 and cut its rating on the stock to "neutral" from "buy". Analyst Jeffrey Kvaal also trimmed his full-year earnings per share forecast by 25 cents to $11.50 and lowered his estimate for iPhone sales over Apple's financial year, which ends in September, to 245 million units from a previous target of 265 million.
The downbeat forecast for iPhone X sales echoes similar concerns on Wall Street that Apple's decision to stagger the release of its anniversary edition six weeks after the launch of its iPhone 8 and iPhone 8-plus models may have trimmed consumer demand. Others have suggested the $1,000 price tag is keeping buyers from stretching to the anniversary edition, given that its features are not substantially different from the current iPhone 8.
Earlier this week, analysts at Cowen & Co. noted that shorter customer waiting times for the iPhone X could signal tepid Christmas demand, but still noted that it holds to the Street consensus of 79 million iPhone unit sales over the three months ending in December.
Kvaal of Instinet has a similar unit sales target for Apple's first quarter, but sees limited upside: "We induce from muted iPhone X promotions that demand is likely to be in line with Apple's expectations for Q1," he wrote.
The gap between the September launch of the iPhone 8 and the November unveiling of the anniversary edition also had a big impact on Apple's global market share, according to data from Kantar Worldpanel ComTech. In the three months ending in October, Apple's global slice of the smartphone pie fell to 32.9%, Kantar said, down from 40.6% over the same period last year.
"It was somewhat inevitable that Apple would see volume share fall once we had a full comparative month of sales taking into account the non-flagship iPhone 8 vs. the flagship iPhone 7 from 2016," said Kantar's Dominic Sunnebo. "This decrease is significant and puts pressure on the iPhone X to perform."
"Considering the complete overhaul that the iPhone X offers, consumers may be postponing their purchase decisions until they can test the iPhone X and decide whether the higher price, compared to the iPhone 8, is worth the premium to them," he noted.
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