 "Apple slips as supply woes weigh on holiday forecast")
Apple’s smaller-than-expected margin forecast sent the company’s shares down nearly four per cent on Wednesday and raised concerns about its ability to capitalise on high demand for its bigger screen phones that bring in more money.
Apple on Tuesday forecast profit margins of 38.0-38.5 per cent for the current quarter, below the average analyst estimate of 38.8 per cent.
Strong demand for the iPhone 7 Plus, which features two cameras, caught Apple off-guard, resulting in a supply crunch that is expected to affect holiday sales.
The phone has a higher average selling price than the iPhone 7 variant and brings in more money for the company.
Some investors had expected a stronger forecast from Apple as rival Samsung Electronics’s reputation takes a blow from the recall of its flagship Galaxy Note 7 phones due to fire hazard.
Apple shares were down 3.8 per cent at $113.78 in early trading, wiping out about $25 billion in market value.
But Wall Street analysts were largely positive. At least six brokerages, including JP Morgan and Raymond James, raised their price targets on the stock.
“We take the company’s multiple references to iPhone 7 plus demand likely outstripping supply in (December quarter) as an affirmation of the near-term lift to the iPhone business,” Barclays analyst Mark Moskowitz wrote in a note.
Apple Chief Executive Tim Cook said on a conference call on Tuesday that iPhone 7 will get into supply/demand equilibrium during the quarter, but iPhone 7 Plus may not.
“We believe this means the company could miss 500,000-1 million additional units if iPhone 7 Plus remains constrained through late December,” Piper Jaffray and Co analysts wrote in a client note. The brokerage raised its price target on Apple’s stock to $155 from $151.
Only one brokerage —Stifel — downgraded the stock to “hold” from “buy” and cut its price target to $115 from $130. Of the 48 analysts covering the stock, 40 rates it “buy” or higher, six have a “hold” rating and two “sell” or lower.
The median price target is $131, according to Reuters data.