AAPL Under $500 Premarket Following Reports Of iPhone 5 Demand Collapse

Tyler Durden's picture

AAPL stock is currently trading at or just under the $500 "generational bottom" in the premarket session, or nearly a one year low, following news first from Japan's Nikkei that Apple has slashed orders for iPhone 5 components, and then from the WSJ, that demand for the flagship phone was far less than expected, resulting in a cut in orders in the supply chain. Per the WSJ: "Apple's orders for iPhone 5 screens for the January-March quarter, for example, have dropped to roughly half of what the company had previously planned to order, the people said.  The Cupertino, Calif., company has also cut orders for components other than screens, according to one of the people.  Apple notified the suppliers of the order cut last month, the people said."


The move comes as the company has been facing greater challenges from Samsung Electronics Co. 005930.SE +1.24% and other makers of smartphones powered by Google Inc.'s Android operating system. While Apple has set the agenda for the smartphone market since it released its first iPhone in 2007, South Korea's Samsung, which sells many Android-based models at various price points, has already overtaken the U.S. company as the world's largest smartphone vendor by market share. Demand is also growing for inexpensive smartphones from Chinese makers such as Huawei Technologies Co.


While the popularity of iPhones and iPads has been boosting Apple's earnings and investors' expectations over the past few years, there have been concerns in recent quarters about how long the growth momentum can continue. Apple's stock price, which peaked at about $705.07 in September, closed Friday at $520.30, down 0.6%.


In the 2012 third quarter, Apple held 14.6% of world-wide smartphone shipments, down from a peak of 23% in the fourth quarter of 2011 and the first quarter of 2012, according to IDC.


Samsung's market share, meanwhile, rose to 31.3% in the third quarter of 2012, compared with 8.8% in the third quarter of 2010. The Korean company said earlier this month that it expects to report another record operating profit for the fourth quarter of 2012, capping its best year ever amid strong sales of its Galaxy line of smartphones. The company expects an operating profit of between $8.1 billion and $8.5 billion for the three months ended in December.




Apple's cut in orders may also affect first-quarter sales of component makers, some of which are largely dependent on the U.S. company. The fact that some iPhone components are highly customized makes it difficult for suppliers to find alternative buyers in a short time frame. Sharp, one of the suppliers of the screens, has been struggling financially with a cash crunch and losses from its television operations.

Perhaps most surprising is that this actually comes as a surprise to some, and yet we look forward to Gene Munster's explanation for how his channel checks may have been so very off. Then again there is always the iPhone 6. And then, a few months later, the iPhone 7, and so on. That time(s) will be different.

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css1971's picture

What people who invested particularly in Apple recently don't understand is that they HTC and Samsung have directly benefited in a free +30 million devices per quarter boost from those who would instead have bought Symbian devices from Nokia if it hadn't been for Elop's burning platform memo.

Well... Nokia's back.

That free +30 million Symbian devices boost Apple, Samsung and HTC shared over the last 18 months as the Symbian platform died. It's not going to be there in the future, they're going to have to fight tooth and nail for it against Nokia from now on and yeah the 920 totaly rocks. Top of the sales charts all over the place.


(Long NOK @ ~ $2.20 :) )

helping_friendly_book's picture

Looks incredible. I am still working w/ 2g since I didn't want to get caught up looking at a tiny screen all day.

I might have to buy some out oif the money puts on apple.

Caracalla's picture

No worries....in a few minutes people will be telling us to just BTFD!

JustObserving's picture

Demand cut in half translates to profit cut by 80%. Yet the stock only falls by 3.5%.  The stock should be in the 300s, if that.

Catullus's picture

Is this suggestive that their revenue growth may slow down? Because for a company with no debt, this really doesn't seem like a big deal.  Their margins may compress when they start selling iPhones in Wal-Mart, but then all of those people will soon begin buying the bullshit apps that have like no marginal cost to push out to people. Plus the era of the carriers subsidizing the phone is coming to an end, and it will be good for both AAPL and the phone carriers.

If it goes down to low $400s, I'm buying it.

EscapeKey's picture

Shrinking market share and margin collapse is now seen as a good thing!

Using the same analysis, RIMM is clearly a screaming buy.

Downtoolong's picture

If a tree falls in the woods and no one sees or hears it, did it really happen?

If a million muppets cry out in the dark, "It's crAAPLE again!", and no one on Wall Street listens or cares, did it really happen?

j0nx's picture

The 32GB  iPhone is a $99 phone at its current level of design and innovation in this marketplace. The reason they are losing market share is because there are many other much better and more innovative phones for sale out there at the same cost or less. The fact that Apple STILL does not support flash or has not forcefully moved the web to HTML5 for embedded video is still a massive negative with regard to iOS and should be reflected in this price of their devices; it's not. Personally I think the only reason people aren't jumping ship from the iPhone altogether at this point is because they are married to it with regard to their hardware accessories and their apps.

MachoMan's picture

Yep.  When I had the decision to make recently, I went with droid...  the iphone was too small, the battery completely sucked...  flash support...  maps... 

the android OS used to be too simple and limited and connectivity (e.g. exchange push) sucked...  the latest os is ace and I haven't had a single hiccup...  the software has made it 90%+ of the way there...  and, when you tack on the difference in hardware, it's game over.

Apple needs to get out of the phone hardware game and start selling its OS to other makers...

Monedas's picture

So the apple is falling from the tree .... I wish someone would accuse me of being a CIA troll .... I just don't have the gravitas .... sigh !

Thorny Xi's picture

I got a $49 iPhone 3GS a couple of years ago and downloaded the TD Trade app.  Sat around my house and made $7400 in two weeks. Best purchase I've ever made!  LOL

devo's picture

Durden's wet dream comes true!

squexx's picture

Apple was the first and still on the highest branch. But Android is more innovative and faster to adapt to the market. Apple will be knocked down from it's perch within 2 years or so.

It will be interesting to see how Micro$ux and Windows 8 will fare in the competition.

Son of Loki's picture

I sold all my shares when Steve passed away. I have doubts AAPL can replace his charisma and creativity. Plus, competition by cheaper units (esp those with bigger screens) is crushing AAPL in many place.

vote_libertarian_party's picture

Gee, trying to sell the most expensive toys during a global recession...who could have seen that coming???

loregnum's picture

How could this be? The lamestream Apple loving media keeps telling me everyone wants the iphone 5 and the problem is supply not meeting demand. As we all know the mainstream media reports nothing but facts so what they say has to be true and the actual evidence is wrong. It's just a conspiracy theory to say demand for Apple products has declined or that they have and are losing market share.


Just please have Apple go the way of Blackberry as I am so sick of all this Apple crap. It is nice to see that some of the Apple zealots seem to be clueing in and not upgrading every 6-12 months for what is basically the same device. I can only hope the non-zealots are converting to (or simply starting with) Android since it is far better than iOS. I shake my head when I think of how limiting iOS is to Android and how anyone could prefer the Apple system in its current form regardless of how many mroe apps there may be which I doubt most people even use sicne most use the same basic apps which are for both systems. Yes, I have experience with each. Only way to get iOS somewhat close is to jailbreak it. 

Blue Horshoe Loves Annacott Steel's picture

People and their iCrap.

Apple = Computers for Liberals & Communists.  The iPad OS is walled off and U're not allowed to mirror most apps to your TV, the exact fucking apps U'd want to mirror.


Blue Horshoe Loves Annacott Steel's picture

U know what's really annoying as hell?  

Someone gave me an iPad for free (I never would've bought 1 meself), but there's no way to stop the bloody ads.

I know, getting a free 1, I shouldnt complain, but its strange that people don't mind paying that much for something that's that restrictive.

Lord Of Finance's picture

Comparing apples and APPL


Apples are one of the most nutritious foods you can eat. They have high nutrient per calorie density, as well as powerful anti-cancer phyto-chemicals, but please do eat the entire apple at once or if not then refrigerate the uneaten portion for it will lose the valuable nutrients and powerful anti-cancer phytochemicals it contains and then it will rot.


APPL was one of the most profitable companies you could buy shares in. They had high profit margins, as well as powerful leadership with innovative fresh ideas, but please do sell the whole thing at once, or if not, then buy some inverse ETF's with the unsold portion for it will eventually lose all its profitible value once it loses its powerful leadership and ultimately runs out of innovative fresh ideas and then it will crash.