Topline
Apple stock fizzled Monday as concerns proliferated about potentially weaker than expected demand for the artificial intelligence-focused iPhone 16 ahead of its Friday debut.
Apple’s unveiling of the iPhone 16 last week at its Cupertino headquarters.
Key Facts
Shares fell 3% by midafternoon, wiping out roughly $96 billion in market capitalization, though Apple comfortably remains the most valuable public company in the world.
Apple dropped Monday to its lowest intraday share price since Aug. 9.
Spurring the selloff were several analyst reports tracking iPhone 16 since pre-ordering began last week, including a late Sunday report from the influential analyst Ming-Chi Kuo of Hong Kong-based TF International Securities that estimated a 12.7% annual decline in preorder volume for the new iPhone model compared to last year’s iPhone 15 launch, based on supply chain analysis and global delivery timeline data from Apple’s website.
Other analysts reported lighter demand during the first weekend via their research, including JPMorgan’s Samik Chatterjee, who wrote to clients early delivery data indicates “modestly softer” demand for the high-end iPhone 16 Pro, and Bank of America’s Wamsi Mohan, who noted Pro model ship times are “somewhat less” extended compared to the iPhone 15 Pro models overall and China ship times are shorter than in other regions, potentially signaling softer demand.
Contra
Mohan cautioned the potentially flawed proxy shipping times can be for iPhone demand, noting “supply, inventory, allocation and pricing could be impacting the ship dates,” or that Apple could be wrongly getting punished for positive developments like supply chain efficiency. And any new pessimism Monday related to China shipping data for the iPhone 16 could be misplaced, considering the company announced last week its new Apple Intelligence AI software won’t be available in Chinese languages until next year, likely pushing any AI-related new sales in the region. Mohan maintained his buy rating for Apple stock Monday due to the “expected multi-year iPhone upgrade cycle” initiated by the generative AI features coming to new iPhone models.
Key Background
Apple stock’s Monday dip on early stage reports highlight the high stakes riding on the iPhone, with the company coming off of its lowest quarterly iPhone revenues since 2021. Wall Street consensus expects the ChatGPT-enabled AI developments to spur a major uptick in iPhone sales, with average analyst estimates calling for a record $74 billion in iPhone sales during Apple’s final quarter of 2024 and 8% annual growth in iPhone revenues over its next two fiscal years. Shares of Apple have rallied considerably since the company first revealed its AI phone plans in June, still up 10% since that time despite the recent slip, outpacing the S&P 500’s 5% gain.