Apple iPhone XR shipment forecast slashed by analyst Ming-Chi Kuo

More Evidence Emerges of Soft iPhone Sales

As Bloomberg's Andrew Cinko noted Wednesday, Apple's correlation with the S&P 500 is double what it was previous year and far larger than what it was in 2013-14 when Apple shares fell about 30%.

On Wednesday, UBS cut its price target on Apple shares to $225 from $240, saying that Apple has likely taking around 6-7 million units out of its initial expectations for a build of around 63 million new iPhone models, split evenly between the XR and XS models. The iPhone XR is also - whether Apple wants to admit it or not - the company's answer to the influx of powerful-but-affordable Android devices.

Moves from several Apple suppliers have also given credence to rumors of poor iPhone XR reception.

"We think investors should consider Lumentum's updated guide as reflecting as much as a 30% cut in Apple orders", Wells Fargo analyst Aaron Rakers said in a note to clients.

Japan's Nikkei reported earlier this month that Apple had told its smartphone assemblers Foxconn and Pegatron to halt plans for additional production lines dedicated to the iPhone XR, the cheapest of this year's new launches.

"We believe these challenges are largely cyclical and investors should pay greater attention to the transformation to services, where Apple was able to report quarterly record revenue of $10 bn in [the most recent quarter] despite a regulatory challenge in China", the JPMorgan analysts write. The company said that it received reduced orders from a major tech firm that is one of its largest customers for 3D sensing components.

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"Over the past 10 years, Apple's iPhone ASP has increased a dramatic $220, or 40%, reflecting its growing value to both consumer and business markets, but almost HALF of all that just came in FY18 alone, making a period of digestion now likely".

The Apple iPhone XR is supposed to be the somewhat-budget-friendly alternative to the company's ultra-luxury iPhone XS and iPhone XS Max models. Analysts said that this could only refer to Apple. And Citi downgraded Skyworks to neutral and slashed its price target to US$85 from US$116, citing both "disappointing iPhone XR unit sales" and "broad smartphone weakness".

"Some people may fear that this now means that the iPhone units are going to start going negative year over year because it's easier to talk about great things and not show the details of things that aren't so great", Citi analyst Jim Suva said during the conference call.

The move led analysts to question the company's business and its share price has since dropped 12.6%.

"Hon Hai's gross margin probably narrowed in 3Q as lower-margin, higher-priced products such as new iPhones constituted a greater share of its revenue mix", Simon Chan, an analyst at Bloomberg Intelligence, wrote in a Nov.5 note.

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