The culprit? A news report suggesting demand for the iPhone X is weaker than many investors would have hoped for. The Economic Daily News, a newspaper in Taiwan, says Apple is trimming its fiscal first-quarter iPhone X guidance to 30 million units from 50 million units. That's according to "unidentified supply chain officials."
Further, analyst Zhang Bin of Sinolink Securities Co. cut his iPhone X estimates to 35 million units from 45 million units for Apple's fiscal first quarter. JL Warren Capital LLC says shipments will fall to 25 million units in the first calendar quarter of 2018, down from the 30 million Apple will likely ship in the fourth calendar quarter of 2017.
I can't help but question some of this analysis. For starters, this report comes amid thin trading around the Christmas holiday. Not that that discredits the information, but its timing is questionable. Second, how many times have we seen these overseas sources telling us misleading information on Apple's iPhone shipments? Too many to count and most just seem to be intra-quarter noise.
Another factor is the analysts. No offense to Sinolink Securities and JL Warren Capital, but we're not exactly talking about gurus like Morgan Stanley's Katy Huberty or Gene Munster, a long-term analyst formerly with Piper Jaffray.
Finally, are we really going to trim off nearly 3% of Apple's roughly $900 billion market cap -- a swing of approximately $25 billion! -- over a report from an outlet most investors have never heard of citing "unidentified supply chain officials?"
That sounds a little fishy to me. It would also be surprising if Apple's iPhone wasn't in high demand during the holidays amid a strong economic backdrop. The fact that there are millions of customers still operating an iPhone 6 or 6s also suggests that a wave of upgrades are likely.
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Some analysts are already questioning the report as well, with Rosenblatt Securities' Jun Zhang saying there may be some confusion between the iPhone 8 and iPhone X production cuts. Zhang also contends that the 3-D components used in the iPhone X's facial recognition haven't seen a supply cut. He adds that Apple is likely taking market share from Android competitors as well.
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