Apple (AAPL) stock drops after lowered estimates for iPhone XR sales

Credit Getty Images  Apple

Earlier this week, Goldman Sachs cut its outlook for iPhone unit sales as a result of Lumentum's negative guidance, writing that, "While Apple may have already contemplated some weakness in its guidance, we feel the timing and magnitude of the [Lumentum] reduction suggests Apple is seeing incrementally worse demand data".

Apple shares fell as much as 5.2 overnight after Lumentum cut its outlook, citing a reduced shipment request from Apple.

Kuo believes consumers could also be waiting for Apple to release a cheaper iPhone XR.

Moves from several Apple suppliers have also given credence to rumors of poor iPhone XR reception. And on Monday, Apple shares dropped after Lumentum - a supplier of "laser diodes for 3D sensing", such as those used by Apple's Face ID - cut its revenue forecast after "one of our largest Industrial and Consumer customers" significantly reduced orders.

The main assembler of iPhones reported net income of NT$24.9 billion (US$806 million) in the September quarter, about 12 per cent below the average analysts' estimate.

Kuo now expects Apple to ship 70 million iPhone XR units during the holiday quarter, down from his original forecast of 100 million units.

"We think there is an inventory component that is still negatively affecting the supply chain", UBS said, indicating that Apple may be as many as 10 million units shy of what Wall Street had initially expected. For tech suppliers facing the future, they have no other big client like Apple, ' said Arthur Liao, an analyst at Fubon Research in Taipei.

Apple's iPhone XR, which boasts the iPhone X's edge-to-edge display, is based on older LCD pixels instead of the X's high-resolution OLED screen. Apple said it preferred to focus on the company's transition to a services company, with regular recurring revenue.

The driver of the projected sales slump is that Apple's new $749 phone, the lower-end iPhone XR, might not be the hot seller that Apple had hoped, and the company may be cutting orders for the device.

Apple CEO Tim Cook was directly asked about this possibility during Apple's most recent conference call.

"Although Apple has positioned itself as a super-expensive handset maker providing high-end products, its strategy has not been working in emerging markets including China and India as Chinese vendors have been making iPhone-like products", he said. He said said the company share price would have to fall to $170 before it would be a good deal.

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