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Apple Inc. (AAPL): Weak Demand Post-Chinese New Year Expected to Soften iPhone X Production Even Further


Concerns have mounted in recent months that Apple Inc.’s (NASDAQ:AAPL) iPhone X may be suffering from weak demand. Today, Rosenblatt analyst Jun Zhang reveals that these fears have become a reality.

The analyst has lowered his iPhone X March and June quarter production estimates by 2.5 and 3 million units respectively, as a result of weak sales during the Chinese New Year. The analyst also points out that a cheaper larger iPhone X Plus will likely arrive to boost weaker-than-anticipated demand for Apple’s latest smartphones later this year.

Zhang commented, “Our estimates reflect 3 million units in the June quarter, which would offset iPhone X cuts of 3 million in the same quarter […] We are lowering our March quarter iPhone shipments from 52 million units to 50 million units reflecting cuts this week of 2-3 million iPhone X units. However, we maintain our June quarter iPhone shipment estimates of 38 million units since iPhone X cuts of 3 million could be offset by 3 million units of red iPhone 8P production.”

“Further iPhone X cuts, in our view, suggest the high-end smartphone market upgrade cycle continues to extend. We are seeing similar issues for Samsung’s S9 model since our research suggests that preorders are weak. Since we expect the overall smartphone market to be flat this year, particularly in the mid-to-high end markets, Apple’s upcoming lower priced iPhone model could drive Apple’s unit growth YoY taking share from Samsung and other Android OEMs in 2H18,” the analyst added.

Bottom line: Zhang reiterates a Buy rating on Apple shares, with a price target of $180, which represents a slight upside potential from current levels. (To watch Zhang’s track record, click here)

This tech giant certainly has the Street divided, as TipRanks analytics indicate. Based on 30 analysts polled in the last 3 months, 16 rate a Buy on Apple stock, while 14 issue a Hold. The 12-month average price target stands at 193.72, marking a nearly 11% upside from where the stock is currently trading.