Apple CEO Tim Cook recently confirmed what we've all known since mid-October: sales of the new iPhones aren't as high as expected, and owners are preferring to stick with their current devices rather than upgrade to the latest generation.
While Cook said the main factor in weakening iPhone demand is the trade war between the United States and China, many believe that the high prices of the 2018 iPhones are actually what deterred many potential buyers from purchasing the devices.
Goldman Sachs says Apple admits that the decline in iPhone sales is just the beginning of a larger decline, adding that further changes to boost profits are expected throughout the year.
That's why analyst Rod Hall says Apple is a lot like the old Nokia, which also struggled to stay in the mobile phone market, reaching saturation as customers weren't interested in upgrading to new-generation models and stuck with the ones they already had.
“Beyond China, we don’t see strong signs of a sales slowdown, but we are simply signaling to investors that we believe Apple’s replacement rates are much “smaller” now that the company is approaching peak market penetration for iPhone.”
Hall expects Apple stock to fall to $140, down from his initial forecast of $182.
“We see the potential for further downgrades in sales numbers, as the whole issue is demand in the Chinese market. We have been highlighting the issues in China since late September and Apple’s stance confirms our view. We do not expect the situation to improve much in the new year,” the analyst explains.
Apple has already resorted to several damage control measures due to lower iPhone sales, including adjusting production at its key suppliers. Reports have claimed that the company has cut orders by up to 50%, especially for the iPhone XR, whose sales are the lowest.
