Apple Faces Headwinds as iPhone 16 Demand Softens and Share Price Declines
Apple is experiencing a challenging start to its latest iPhone cycle as reports of weaker-than-expected demand for the iPhone 16 series have led to a significant drop in the company’s stock price. This may deeply affect the new reports for the first quarter which can impact the stock as well as the Nasdaq in a multitude of ways. The tech giant’s shares fell by 3.6% in Monday morning trading, reflecting growing concerns among investors and analysts about the company’s near-term prospects
Sluggish iPhone 16 Demand
According to prominent analyst Ming-Chi Kuo of TF Securities, pre-orders for the new iPhone 16 have reached approximately 37 million units, representing a 12% decrease compared to the iPhone 15 launch last year. In the first week, the numbers are even more impactful as Apple had only sold 9.8 million units of the model down 27% in the first-week presale compared to last year’s model The primary factor contributing to this decline appears to be disappointing interest in the iPhone 16 Pro series. Apple didn’t input certain AI features in the base iPhone 16 model that were promised to be input at the 2024 Apple event. Tech experts speculate that this may be due to the fact that it may undersell the Pro and Pro Max models with demand for those models still declining from the year prior. Tech expert Marques Brownlee believes that you shouldn’t buy the iPhone 16 based on the promise of future updates that will input the promised Apple Intelligence features onto the base model.
Analysts from several major financial institutions, including Barclays, JPMorgan, and Bank of America, have noted that shipping delays for the Pro models are less pronounced than in previous years, potentially indicating weaker demand. Barclays analysts reported that Pro model orders have decreased by double digits compared to last year, while base and models have seen some growth.
Impact of Delayed Apple Intelligence
A significant factor contributing to the subdued demand is the absence of Apple Intelligence, a highly anticipated feature that will not be available at the time of the iPhone 16’s launch. The first features of Apple Intelligence are expected to be released in a beta version next month through software update 18.1, which may have dampened initial excitement for the new device. This along with increased competition has analysts speculating on if this product will be able to get Apple past its “iPhone rut.”
Market Response and Share Price Decline
The news of weaker demand for the iPhone 16 has significantly impacted Apple’s stock price, which recently dropped to $232.2. This decline has erased much of the gains the company had made over the past four months. The situation has not only affected Apple but has also had a ripple effect on the broader technology sector and the Nasdaq index, where Apple is a major player. Because Apple is one of the largest companies on the Nasdaq, its performance heavily influences the index’s overall movement. As a result, the Nasdaq 100 index has struggled, rising about 15% year-to-date while Apple’s gains have fallen to around 12%. This drop has raised concerns about the entire smartphone market and related supply chains, leading investors to rethink their expectations for tech stocks amid fears of a slowdown. Analysts from firms like TF Securities, Barclays, and JPMorgan have reported that pre-orders for the iPhone 16 are down about 12% compared to last year’s iPhone 15 launch as previously stated, with orders for Pro models decreasing by double digits. The lack of expected features like Apple Intelligence at launch has further dampened excitement. Despite these challenges, some analysts remain hopeful about Apple’s long-term growth potential, pointing to its strong financial position and the large number of older iPhones that need upgrades. As the market continues to process these developments, many will be watching Apple’s upcoming earnings announcement on October 31, 2024, which is expected to provide more insights into how these trends may affect both Apple’s financial performance and the wider tech industry in the future.
Competitive Pressures and Market Challenges
Adding to Apple’s challenges is the increasingly competitive landscape, particularly in the Chinese market. Analysts have noted that weak macroeconomic conditions and fierce competition are putting pressure on iPhone sales in China, leading Apple to implement substantial discounts to boost sales of the previous iPhone 15 model.
Looking Ahead
Despite the current setbacks, some analysts remain optimistic about Apple’s long-term prospects. Dan Ives of Wedbush Securities estimates that out of an installed base of 1.5 billion iPhones, 300 million have not been upgraded in four years. This aging installed base could potentially drive a significant upgrade cycle once Apple Intelligence features are fully implemented.
As the market continues to digest these developments, all eyes will be on Apple’s ability to navigate these challenges and maintain its position as a leader in the smartphone industry. The company’s upcoming earnings announcement, scheduled for October 31, 2024, will likely provide further insights into the impact of these trends on Apple’s financial performance.
Written by Aniruddh Sajan
