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

More Evidence Emerges of Soft iPhone Sales

Apple warned earlier this month that holiday sales would miss Wall Street expectations, blaming the fall on weakness in emerging markets and foreign exchange costs. Lumentum didn't name the customer, but Apple is its biggest, according to Bloomberg supply-chain data.

"The legacy iPhone models forecast is likely to increase significantly thanks to more affordable prices; the total iPhone shipments in 1Q19 are likely to see a YoY decline", Kuo continued, citing Career and Nissha Printing as two suppliers that might be affected by Apple's cuts.

Reprsenting 60% of Apple's revenues the latest iPhones are not selling at the same volume levels as in the past with suppliers now panicking as Companies such as Lumentum Holdings witnessing a 30% drop in share value due to cancelled orders. With shares of the Cupertino, Calif. -based tech titan down almost 18% from all-time highs reached in October, some see the recent weakness as a buy opportunity, while others are warning of more pain ahead for the high-flying FAANG player.

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"We think investors should consider Lumentum's updated guide as reflecting as much as a 30 per cent cut in Apple orders", Wells Fargo analyst Aaron Rakers said in a note to clients. Analyst Mark Kelleher believes that Apple might have had too much Lumentum inventory which it needs to clear off. He predicts shipments in the 47-52 million range, compared to 52 million sold in the first quarter of 2018.

"We have reduced our iPhone XR shipment estimation from 100mn units to 70mn during the new product lifecycle", Kuo wrote, citing reduced Chinese consumer confidence stemming from the trade war, high prices, and competition from Huawei. Indeed, Apple's most recent quarterly report illustrates that Apple - with more margin friendly devices in the mix - can easily generate more revenue even in the face of stagnating iPhone sales. Lumentum's chips are not used in phones older than last year's iPhone X.

Apple itself has admitted that sales will be less than expected as its charge more for less policy seems to have backfired, and its iPhone cash cow has run out of milk. "With our proven ability to deliver high volumes, years of experience, hundreds of millions of devices in the field, and new product and customer funnel, we remain confident in our leadership position in the nascent market for laser diodes for 3D sensing".

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