Apple Inc.: Should You Be Worried About iPhone X Cuts? Analyst Jun Zhang Shares Two Cents

Rosenblatt's Jun Zhang says he looks for iPhone X cuts in the first fiscal quarter to circle 3 million- not the massive 10 million bears are expecting.


Some jitters are winding their way through the market grapevine, where rumor has it Apple Inc. (NASDAQ:AAPL) is going to be making some bit iPhone X component order cuts. Whispers say the iPhone X comes at too steep a price and there are not enough cutting-edge new gadgets to validate consumers investing in a phone just under $1,000. Bears believe Apple’s demand is falling back.

Rosenblatt analyst Jun Zhang comes out swinging strong for the bullish camp, making a case that “iPhone X cuts are not as severe as the Street fears.”

Therefore, the analyst reiterates a Buy rating on AAPL stock with a $180 price target, which implies a close to 2% upside from current levels. (To watch Zhang’s track record, click here)

“Based on our research, we forecast iPhone X cuts to be around 3 million units this quarter, well below the bearish view of 10 million units. We believe the primary driver of the downward revisions in iPhone component and shipment orders is reductions in iPhone 8 and 8 Plus NOT the X,” defends Zhang, adding: “The primary driver around our cautious view on the smartphone supply chain is our view that the Android market has weakened.”

Tweaking prelaunch expectations, the analyst now looks for a 20% reduction in iPhone X and iPhone 8/8 Plus orders for the first fiscal quarte of 2018, or between 10 and 11 million units. Likewise, the analyst has dialed down his total iPhone production cuts, scaling down 18% to between 8 and 9 million units; iPhone X cuts roughly 3 million; and iPhone 8/8 Plus cuts between 5 and 6 million.

In a nutshell, “We believe that there have been some iPhone X specific component order cuts over the last two weeks, particularly in the dual core battery, camera module, and 3D sensing components. We estimate these cuts could be between 2-5 million units for the March quarter. Although we believe most iPhone X component cuts are around 4-5 million units, we note 3D sensing related components, especially in the dot projector, should only see very small cuts (we estimate 2 million units) since AMS […] and LG Innotek […] continue to face yield issues,” Zhang contends.

TipRanks shows largely optimistic analyst perspective behind the tech titan, with 21 of 29 analysts in the last 3 months bullish on Apple stock and just 8 sidelined. With a return potential of 9%, the stock’s consensus target price stands at $194.76.

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