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Apple stock selloff after production cut shows iPhone buzz is fading

The Apple (AAPL) management has probably got carried away by the success of iPhone, and nowadays the launch events are coming in quick succession. Unlike in the initial years of its launch, shipments of the popular smartphone missed expectations on multiple occasions in the recent past.

After maintaining a bullish outlook for long, despite softening orders, the company has reportedly slashed the production of all the new iPhone models it rolled out this year. Though the market has been on alert following reports that Apple’s suppliers are facing demand crunch, the company’s stock fell sharply Monday after media reports revealed the production cut.

The stock had a negative start to the week and plunged about 4% as trading progressed Monday, dragging the Dow Jones index by more than 400 points. A similar slump was witnessed soon after the latest earnings report when the management’s prediction for iPhone shipments fell short of expectations.

After maintaining a bullish outlook for long, despite softening orders, the company reportedly slashed production of all the new iPhone models

While Apple is already facing stiff competition from comparatively smaller manufacturers, especially in China, too many new iPhone models are hitting the market these days. The general perception is that the prices of the latest versions of the feature-rich phone are too high. It needs to be noted that Apple changed its initial plan to roll out two new phones this year, and instead released three.

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Apple’s suppliers including Cirrus Logic and Broadcom, who have been warning about the dip in the demand for top-end iPhones in recent weeks, also suffered a jolt when the market opened Monday. Underscoring the negative sentiment, the company recently asked its Asian partners to scale down production capacity. The recent decision to stop providing the break-up of sales numbers from the next quarter indicates that the management sees trouble going forward.

According to reports, production of iPhone XS, XS Max and XR have been trimmed by one-third after demand consistently stayed below the company’s outlook, with the cheaper XR witnessing the most pronounced weakness. Interestingly, earlier models like iPhone 8 and 8 Plus continue to attract customers.

 

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