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Apple "Faces Risk Of Inventory Correction": Three Channel Checks Confirm Deteriorating iPhone Sales

Tyler Durden's picture




 

One month ago, Credit Suisse confirmed what we had reported in the previous several weeks, namely that according to channel checks, iPhone supply chain orders had weakened recently adding that "in our view, the continued weak supply chain news could weigh on Apple shares for the next few weeks/quarters." The market did not like the news and sold AAPL stock only to promptly BTFD as it always has in the past 7 years: after all any transitory weakness is merely an opportunity to buy, right?

Only this time the weakness may not be transitory, because as of this morning we now have not one but three channel checks all pointing to a substantial slowdown in AAPL's flagship product and core revenue generator, the iPhone.

First, here is Credit Suisse with a follow-up penned last week, in which it writes that Asia supply chain confirms continued weakness.

"The CS Asia Technology Team has confirmed in their most recent November survey that the iPhone supply chain orders will be weaker than originally forecast. In our view, the continued weak supply chain news could weigh on Apple shares for the next few weeks/quarters. We continue to believe that with high retention rates, continued installed base growth, and the optionality of a smaller 4-inch iPhone, Apple remains an OP. "

 

Production cuts reconfirmed. Our Asia Tech Team has again confirmed that Apple has lowered its component orders in November and are now expecting builds of 70-75mn in December and 45-50mn in March (note the March estimate includes as much as 4mn iPhone 6c). The cuts seem to be driven by weak demand for the new iPhone 6s. As we had highlighted, we do see a subdued iPhone cycle for the next few quarters. We maintain our below consensus estimates of 78mn/55mn for Dec./Mar. We maintain our CY16 units of 222mn to reflect this and assume 235mn for 2017 (6% growth y/y).

We don't need to remind readers why a slowdown for Apple is bad for not only the market (where AAPL is the largest market cap stock) and the economy, but just in case here it is again: Apple Accounted For 20% Of All U.S. Margin Expansion Since 2010.

 If AAPL is about to hit a growth wall, then say goodbye to US margin growth of which AAPL accounted for one fifth in the past 5 years.

What's worse for AAPL, however, is that unlike a month ago, this time two additional channel checks confirm that not all is well in the world that Steve Jobs built.

According to OTR Global, Apple is seeing 'muted' sales for iPhones 6S, 6S Plus as sell-through volumes during mid-4Q appear to be weaker than volumes of iPhone 6, 6 Plus during mid-4Q 2014 for half of sources in China, North America and Europe. OTR cites senior managers and procurement heads from network operators and distributors in Europe, North America, China, and as Bloomberg reports,  the firm reiterates a 'mixed' read on AAPL.

Finally, as the WSJ notes, Pacific Crest joins the wall of worry with concerns that after iPhone sales rose solidly last quarter from a year earlier, demand for the soon-to-start quarter uis falling short of the investment bank's 59M-unit estimate. It adds that in the US, "we see increased risk of an inventory correction as retail-store inventory levels of approximately 4.5 days" for the latest iPhones "have reached levels that were not seen until five months after the launch of the iPhone 6."

Of course, since none of these three banks wants to lose AAPL as a corp fin clients, they all hedge by saying that there is room for error and that this weakness could simply be transitory. Unless, of course, even end consumers are finally reaching their saturation point with the AAPL product cycle, and after the failure that was the Apple Watch, it may well be that the iPhone 7 may seal the fate of the company - if it performs as relatively poorly as the current 6/6S product cycle, Tim Cook may have to dig very deep in his bag of magic tricks to channel the ghost of Steve Jobs and come up with a new and desirable product for a company which increasingly many say hasn't come up with anything truly original or creative since the passing of Jobs.

 

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Mon, 12/07/2015 - 12:41 | 6888159 hedgeless_horseman
hedgeless_horseman's picture

 

 

Never owned one.  Never will.

Now, the waterproof iPods, on the other hand, are the absolute shit:

The Third hedgeless_horseman's 12 Days of Christmas ~ Gift ideas for the Zero Hedge reader in your life

$408 will enable swimming 4-5 days per week for 30+ minutes, and can get almost anyone to a, "yes," on each of the questions in 90 days.

$135   Waterproof iPod - Audioflood
$15   Goggles - Speedo Vanquisher 2.0
$23 - $55   Suit - Speedo Endurance
$235 = $100 + $45/month x 3 months  YMCA membership

Mon, 12/07/2015 - 12:41 | 6888183 38BWD22
38BWD22's picture

 

 

Kind of looks like it is all coming down doesn't it?

Beware & prepare.

Mon, 12/07/2015 - 12:47 | 6888209 813kml
813kml's picture

That's a little too high tech, I prefer to strap a record player to my back while swimming laps for a CrossFit experience.

Mon, 12/07/2015 - 13:08 | 6888342 Uchtdorf
Uchtdorf's picture

Ha! I carry the Mamas and the Papas on my shoulders when I do my daily marathon training.

Mon, 12/07/2015 - 13:26 | 6888439 Buckaroo Banzai
Buckaroo Banzai's picture

Pikers! I carry a grand piano on my back, with Valentina Lisista playing it for me.

Mon, 12/07/2015 - 14:27 | 6888756 JRobby
JRobby's picture

And so close to Christmas too!

Mon, 12/07/2015 - 19:34 | 6890467 Flatchestynerdette
Flatchestynerdette's picture

Who wants to constantly upgrade for a measly new port? What people want is longer battery life and a way to get rid of ads that take up the whole screen. I actually want my flip phone back please. Life was much simpler and I got more done w/that and my laptop.

Mon, 12/07/2015 - 15:09 | 6888959 Barrack Chavez
Barrack Chavez's picture

Nice product placement

Mon, 12/07/2015 - 12:44 | 6888196 Sothis
Sothis's picture

Sales down in December?  BULLISH.

Mon, 12/07/2015 - 12:45 | 6888198 yogibear
yogibear's picture

Never purchased one. Would never waste my money.

Same here. Refuse to join the Tom Cook Apple cult.

Someone gave me an iPod 4. The IOS 6 is not upgradable. Apple makes sure you have to spend the money to upgrade.

 

Mon, 12/07/2015 - 13:44 | 6888531 firstdivision
firstdivision's picture

I love the iPod, as it syncs with my car well and I have my entire audio collection at my fingertips.  Would never buy a iPhone or iPod Touch, total waste of money IMO. 

Mon, 12/07/2015 - 14:28 | 6888763 JRobby
JRobby's picture

And what amazing sound quality......

Mon, 12/07/2015 - 14:37 | 6888802 Id fight Gandhi
Id fight Gandhi's picture

Cult? He's probably too busy on grinder to care about quality products.

 

Ios 6 was the last good ios. Every release after comes riddled with errors needing patches and every upgrade slows down your device.

Mon, 12/07/2015 - 12:46 | 6888205 Made in Occupie...
Made in Occupied America's picture

Tim Cook needs to email Jim Cramer now!

Mon, 12/07/2015 - 14:27 | 6888757 hal10000
hal10000's picture

I've been saying for years that the captains of industry (in the real economy) need to go to war with those in finance as finace shenanigans are destroying the customer base for anyone who builds anything.

Do I like Apple products?  You bet I do.  Do I feel sorry for Apple?  No, because if I can see this problem than so should their leaders; this super-educated elite really should know better and instances like these, along with Bush and Obama really does underscore the TRUE value of American elite education.  Now, will we see some form of coordination to go after the clear and present danger to world order?  Probably not.  All insitutions are failing no matter where you look.

Mon, 12/07/2015 - 17:19 | 6889681 inhibi
inhibi's picture

Apple could easily get into another market.

Looking at their product line, they have a music/app/movie store, computers (declining growth), mobile phones (declining growth), ipads/ipods (declining growth). In a decade, everybody will buy a phone once every 5 years the tech will be so durable and quick.

In my mind, the software segment of their business is saturated. We dont need anymore apps, or clocks, or weather widgets, iOS'setc.

We also dont need anything else but the mobile phone. It will become the tool used for everything. My little sister already uses her phone for everything, including making powerpoint presentations. Laptops/tablets will be a niche market for those that need it.

Wearable tech is also a laughable forefront. Until they make a shirt that becomes a sweater when the temperature goes below 50 F, watches and t-shirts that change color/tell time is just clickbait. That goes for Google glass too. 

Apple needs to realize that the future king will not be the company who comes up with modern designs. Designs can and will be stolen, copied, reworked, etc.

And all these phones are trending toward a singular large rectangular screen with a few cameras on the back. This will NEVER change. What will change will be the materials used to make the phone.

Apple should have Bell Labs equivalent whose sole goal is to research new tech for screens and moldable composite materials with extremely high energy absorption/weight ratios (more energy a material can absorb, the better it can withstand impact). Imagine a phone, that looks like a piece of glass and can bend modestly under extreme pressure, never cracks, and can be thrown onto the ground without damaging the screen or internal components.

Thats the phone of the future.

Not a fucking watch that needs....wait for it....a phone. To work. Pathetic.

 

 

 

Mon, 12/07/2015 - 12:46 | 6888208 Caveman93
Caveman93's picture

Bought a used iPhone 4 back in 13 for $100 from a business upgrading theirs. Still going strong. Actually replaced the battery myself. Should last quiet awhile. 

Mon, 12/07/2015 - 13:13 | 6888316 Deus Irate
Deus Irate's picture

I was able to test-drive an iPhone 6 a few weeks ago as part of a promotion. It was a decent phone with an easy camera but it would have costed me a small fortune to get all the apps I need and what was included with the phone could not be set to ask me before doing anything -- a basic requirement for me. I like to decide what the phone does, not the other way around. I wound up buying an unlocked Note 4 which is so much better it ain't funny. I had never done a head-to-head comparison before and was rather surprised at the results. I thought the iPhone would at least be somewhat comparable, but nope. No idea about older models but the i6 was not even in the same class last year's Note 4.

Mon, 12/07/2015 - 15:06 | 6888949 Barrack Chavez
Barrack Chavez's picture

Thank you Tim Cook for that lovely advertisement / product review

Mon, 12/07/2015 - 12:47 | 6888210 EddieLomax
EddieLomax's picture

This inventory should fly off the shelves when the helicopter money starts to drop...

Mon, 12/07/2015 - 12:52 | 6888247 CPL
CPL's picture

That's the thing, last time a pound of ground beef was 0.69 - 0.99 a pound.  This time it's around 6.00.  They helicopter money in now and the price of food will double in a year.  Ain't no one buying an iPhone then.  Besides, they just fucked themselves with inventory stuffing like LOTS of excompanies in the past...and here's the funny thing.  This is the second time they've done it to themselves.  Last time Gates bailed them out with a loan and Jobs came back a rode the company board hard to tighten things up.  This time...I doubt Bill Gates gives a shit and Steve Jobs is dead.

Bye bye Apple.

Mon, 12/07/2015 - 12:48 | 6888213 Blythes Master
Blythes Master's picture

Like hedgy, never owned one, never will.

I'd rather get a tube of ASE's and then go out in my rickety boat than purchase a 4 to $600 ball and chain, errr, iphone.

Mon, 12/07/2015 - 12:49 | 6888224 katchum
katchum's picture

Don't forget the deteriorating foreign currencies... and foreign Apple earnings.

Mon, 12/07/2015 - 12:50 | 6888235 chistletoe
chistletoe's picture

Once everyone who wants one, already has one, then what? 

I mean, what did Wall Street expect?

 

Did they really think that people were going to buy two, or three, or four, just for the garage?

Mon, 12/07/2015 - 15:04 | 6888934 Barrack Chavez
Barrack Chavez's picture

Not to long ago, Wall Street priced AOL (remember them? :) with the assumption that they could sell 18 billion subscriptions, to a planet that only had about 6 billion people (many of whom have no electricity, computer, phone land line, and didn't speak English).

Apparently the MBA's figured the nomads in Africa were going to buy 3 subscriptions to use on computers they didn't have, powered by no electricity.  And the nomads were going to learn English (and earn USD) to use it.

But fear not, the new Apple iPhone 6+/-s has a camera on the front, and you can run angry birds twice as fast!!!   Everyone run out and spend $800 to play angry birds now!

Mon, 12/07/2015 - 13:02 | 6888297 JPMorgan
JPMorgan's picture

More competition at the top end, there are some awesome mobiles to choose from now.

Mon, 12/07/2015 - 13:04 | 6888312 commishbob
commishbob's picture

When Apple and/or its sycophants start breaking out the "Chinese Math," you'll know it's truly over.

Chinese Math: "If only 1% of the Chinese population owned an iPhone, sales would be triple what they are now!!!" 

Mon, 12/07/2015 - 13:32 | 6888465 Buckaroo Banzai
Buckaroo Banzai's picture

We used to call that the "Chinese glove theory"... if you could sell a pair of your gloves to only 1% of the Chinese population...

Mon, 12/07/2015 - 13:04 | 6888314 NoWayJose
NoWayJose's picture

Keep announcing the next iPhone just before the big Xmas season.... There is a reason why many tech companies hold off announcements until February!

Mon, 12/07/2015 - 13:15 | 6888370 bmr22
bmr22's picture

I bought an LG smart phome at the Radio Shack going out of business sale for $29. It surfs the web, takes pictures, great battery life it does everything you could want. Even takes a mini sd card to expand the memory if you want to use it as a music source.

Mon, 12/07/2015 - 13:26 | 6888437 ItsSnowingInColorado
ItsSnowingInColorado's picture

I am curious to see if this has anything to do with carriers no longer subsidizing phones for 2 year contract agreements. I am sure many will lease their phone or whatever they do now. 

Maybe people will wise up and use their phone until it stops working instead of always going after the newer shinier made in china pos. 

 

 

 

 

Mon, 12/07/2015 - 13:28 | 6888444 GhostOfDiogenes
GhostOfDiogenes's picture

What world do you live on?
I can get a iphone 6s or plus for 200 and a 2 year contract.

Stop posting while stupid.

Or just stop posting.

Why can comments here have so much bullshit in them?

Tue, 12/08/2015 - 17:25 | 6895839 Abbie Normal
Abbie Normal's picture

You didn't "get" an iphone for $200, you just made a down payment on a $600-$1000 phone.  Try breaking that 2-yr contract and the other $400-$800 is still due.

And North America is finally catching up to the rest of the world by phasing out those 2-3 yr contract plans.  They've replaced it with financing the phone for 2-3 years and pay separately for the voice/text/data plan, so there's no hiding the true price of that $600-1000 phone from the arithmetically challenged.

Mon, 12/07/2015 - 14:45 | 6888843 Berspankme
Berspankme's picture

I've got a Tmobile phone I bought in 2007. Works fine. Everytime I call someone they answer.

Mon, 12/07/2015 - 13:26 | 6888438 GhostOfDiogenes
GhostOfDiogenes's picture

For all luddite/technology haters out there (of the right wing), apple is far better than windoz by far and I don't trust jooogle either nor asians.

The iphone 6 is a transition iphone so why anyone expected lots of sales well, I have a bridge in Paris to sell you.

Expect iphone 7 to be better than the previous iphones.
I have a 5 but the 6 sounds not that much better so I will wait a year till the 7 comes out in 2016.

Fuck samsung. Their crap is the worst I have ever bought. Pure crap.

Mon, 12/07/2015 - 13:28 | 6888448 buzzsaw99
buzzsaw99's picture

crAAPL = Brawndo

Mon, 12/07/2015 - 14:08 | 6888667 TalkToLind
TalkToLind's picture

A 72 month payment plan is the obvious answer.  If they did that they could charge $1499.99 per iPhone and the goyim would never notice.

Mon, 12/07/2015 - 14:11 | 6888682 nowhereman
nowhereman's picture

It never ceases to amaze me how people are willing to pay for and upgrade their own personal leg monitoring device.

f*cking morons.

Mon, 12/07/2015 - 14:26 | 6888754 I Write Code
I Write Code's picture

I just want an iPhone that actually looks like an apple, is that so much to ask?

Mon, 12/07/2015 - 14:43 | 6888836 Berspankme
Berspankme's picture

I've never had an Iphone. Are they any good?

Mon, 12/07/2015 - 15:15 | 6888983 TalkToLind
TalkToLind's picture

They're one of the best personal tracking devices on the market.  Law enforcement loves them.

Mon, 12/07/2015 - 14:52 | 6888881 Trick Shroadé
Trick Shroadé's picture

ZH has a pretty bad track record when it comes to predicting AAPL's demise.

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