apple stock

Apple (NYSE: AAPL) stock is trading lower today even as the broader US markets are trading sideways. Reports suggest that Apple is planning to halt the planned production increase of its newly launched iPhone 14.

The model was launched earlier this month only. Usually, Apple launches new iPhone models in September which is the last month of its fiscal year. 2020 was an aberration as the COVID-19 pandemic forced the company to delay the launch.

Bloomberg reported that Apple has asked its suppliers to halt the planned 6 million increase in iPhone 14 production. The company is now looking to produce 90 million units in the second half of 2022 which is similar to the last year.

The news triggered a sell-off in not only Apple but also that of its suppliers. Notably, reports of Apple halting the planned increase in iPhone production comes a couple of days after a Bloomberg report citing Jefferies data said that Apple sold 987,000 iPhone 14 units in the first three days of delivery, which was 11% lower than the sales of iPhone 13 during the corresponding period last year.

Analysts on iPhone 14 Sales Outlook

Jefferies said, “These initial data suggested iPhone 14’s sales may not be as strong as the pre-order levels indicated, since pre-order does not come with any payment obligations.”

Meanwhile, some of the other analysts including Ming-Chi Kuo and Bank of America’s Wamsi Mohan remain bullish on the outlook for iPhone 14 sales. They see higher demand for the higher-margin iPhone 14 Pro models boosting Apple’s gross margins.

Bloomberg Intelligence analyst Anurag Rana is not surprised by the news of Apple halting the planned increase in production. He said that we “believe that weak demand from Europe and China could hurt overall iPhone sales in fiscal 2023.” Morgan Stanley also said that the news does not change its forecasts for Apple iPhone sales.

Apple iPhone Sales Were Strong in the Third Quarter

In the fiscal third quarter of 2022, Apple reported iPhone revenues of $40.67 billion which was 3% higher than the corresponding quarter last year and ahead of the $38.33 billion that analysts were expecting. However, Mac revenues fell 10% YoY to $7.38 billion and fell short of the $8.70 billion that analysts were expecting.

Since the onset of the COVID-19 pandemic, Apple has refrained from providing hard revenue guidance as it used to do before the pandemic. During the earnings release, it blamed “continued uncertainty around the world in the near term” for not providing the guidance.

It did however provide some color on the fiscal fourth quarter guidance and said, “Overall, we believe our year-over-year revenue growth will accelerate during the September quarter compared to the June quarter despite approximately 600 basis points of negative year-over-year impact from foreign exchange.”

The company said that the negative impact of the supply chain outages in the current quarter would be less than $4 billion. Apple’s sales were also hit as the company stopped selling in Russia. It has now booted Russian social media company VK from the App store.

Warren Buffett Bought Apple Shares in the First Half of 2022

Berkshire Hathaway, which is the second largest Apple stockholder added more shares in the first half of 2022. While Berkshire already has a humongous position in the company, Warren Buffett capitalized on the fall and bought more Apple shares.

Apple is a cash-rich company and generates loads of cash every quarter. It generated operating cash flows of $22.9 billion in the June quarter, a new record for the company. It returned $28 billion in cash to stockholders in the quarter, mostly through buybacks.

The company ended the quarter with net cash (total cash minus debt) of $60 billion. It eventually intends to reach a cash-neutral position which would mean more buybacks. However, like fellow tech companies, it is frugal with dividends. There are however other stocks that have a high dividend yield.

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