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Apple loses $14 bn in m-cap as shares dip on reports of weak iPhone X sales

Apple Inc will halve its iPhone X production target for the first three months of the year to around 20 million units

Reuters 

iPhone X, Apple
iPhone X

Inc will halve its X production target for the first three months of the year to around 20 million units, Nikkei reported on Monday, sending its shares down 1.6 per cent.

The report added to growing concerns about weak sales of the $999 phone, making investors jittery about the company's financial outlook when it reports first-quarter results on Thursday.

Apple's shares fell to their lowest level in 2018, knocking off $14 billion from the company's market value. The company declined to comment.

Analyst Toni Sacconaghi of Bernstein cut both his second-quarter and full-year forecasts for iPhones but said he did not expect Apple's 2018 profit to fall steeply because of changes to US tax law that will bring the company's rate down to 18 percent.

"earnings should handily beat December quarter expectations, but March guidance could moderately disappoint," UBS analysts said.

The production cut was prompted by slower-than-expected sales in the holiday shopping season in Europe, the United States and China, the Japanese newspaper reported, without citing a source.

The X was the first phone to sport a new design since the launch of the 6 in 2015 and many expected it to lead to blockbuster sales, dubbed by Wall Street analysts as a "supercycle."

"This was supposed to be the supercycle year and if hasn't been able to drive substantial unit growth this year, then that makes you a little cautious on future cycles," Atlantic Equities analyst James Cordwell said.

Several analysts have lowered their estimates for X shipments in the past few weeks, citing the high price of the device and other factors, with at least three downgrading their rating on the stock.

Sacconaghi of Bernstein had originally predicted that would outpace Wall Street expectations of 62 million iPhones by selling 66 million units, but on Monday he cut that figure to 53 million units, a nearly 20-percent cut.

He also cut his full-year unit forecast 11 percent to 220 million units.

But he only slightly revised his full-year earnings per share estimate for 2018 to $11.80 from $11.87, citing the positive effects of U. S. tax law changes.

Adding to the concerns, Verizon Communications Inc said last week its postpaid device activations were lower than last year as people were keeping phones longer.

A survey of people planning to buy the showed that the percentage of them looking to buy the X has dropped to 37 percent from 43 percent in an earlier survey, UBS analysts wrote in a note on Monday.

The X, which features an edge-to-edge display and facial recognition technology to unlock the phone, went on sale in November in the United States.

Asian supply chain checks suggest that X orders have been weakening recently, with first-quarter production likely to be about 20 million units, JP Morgan analysts wrote in a note dated Jan. 24.

A few of Apple's parts suppliers are based in Asia. Shares of Foxconn, one of Apple's main suppliers and formally known as Hon Hai Precision Industry Co Ltd, fell 0.7 per cent on Monday.

Shares of US-listed suppliers such as Micron Technology Inc edged lower following Nikkei's report.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, January 30 2018. 07:56 IST
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