Apple shares declined Monday after a report that iPhone production had slowed.
If that sounds familiar, congratulations for paying attention. The big difference this time is that the production-decline rumors are coming a month later than normal for the iPhone X, which should be expected because that new model began selling later than other iPhones.
The Nikkei Asian Review wrote Monday that Apple AAPL, -0.05% will produce half as many iPhone X units as it initially expected during the March quarter, and analysts at JP Morgan commented last week that the company halved its build orders for the March period relative to the holiday quarter.
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Apple investors should be familiar with this show. iPhone shipments traditionally peak during the holiday quarter, right after a new model is announced. Then they taper off in the new year as shoppers opt for a greater mix of older models—or figure they can wait around until the next latest and greatest version comes out in the fall.
In 2014, after the iPhone 6 produced the so-called supercycle that many expect to repeat with the current crop of Apple smartphones, analysts began chatting about the possibility of a March-quarter production slowdown as early as December. A Deutsche Bank analyst wrote at the time that demand for the then-new iPhones might not be as great as the market was predicting and slashed his production estimates for the beginning of 2015 accordingly.
The pain was short-lived. Apple shares fell 0.4% on Dec. 2, 2014, the day of that note, after tumbling 3.3% the day earlier after Morgan Stanley analysts suggested paring back Apple allocations. The stock rebounded the next day, slumped again for a month, and then rallied for through the early spring.
Share movement following the iPhone 6 and reports of production cuts for that device is notable given that the iPhone 6 is considered to be Apple’s last major design refresh prior to the iPhone X. It was in 2014 that Apple began offering two different screen sizes and made dramatic changes to the phone’s form factor.
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Many have expected the iPhone X to drive a similar wave of upgrades. Oppenheimer analyst Andrew Uerkwitz, however, wrote Monday after trimming shipment estimates that “it appears the ‘supercycle’ we all wanted isn’t here.” He has a perform rating on the stock.
It took a bit longer for Apple’s stock to recover during the iPhone 6S cycle, after analysts began rumbling about a production slowdown in December of 2015. An upbeat analyst at Drexel Hamilton remarked on Dec. 8, 2015, that a sampling of supplier stocks had a weaker-than-usual November, but he attributed the performance to timing variations between the different product cycles. Shares were little changed, though they dropped 0.6% on Dec. 14, after a trio of analysts cut their iPhone estimates. It took shares until October of the following year to rebound to their levels from prior to the Drexel note.
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The hubbub began in December 2016 during the iPhone 7 cycle, when Digitimes warned that Apple had started to decrease build orders for the device. Shares dropped 0.9% that day, Dec. 1, before rebounding the next day and beginning a steady rally a week later.
For the iPhone X saga, this isn’t even the first report of production pullbacks for Apple, as the stock was hit by reports before the iPhone X was even officially releasedthat it was cutting orders for components. Shares fell 0.9% that day, then jumped 1.7% the next.
Apple will reveal iPhone X sales and the rest of its results from the holiday-shopping quarter Thursday. Apple stock declined 2.1% Monday, its largest one-day in about a month. Overall, Apple shares have gained 53% from their late November 2016 levels, compared with a 39% gain in that time for the Dow Jones Industrial AverageDJIA, -0.67% of which Apple is a component.