Apple has slashed its planned iPhone 12 mini shipments in the first half of 2021, according to a Nikkei Asia report. Market analysts gave their assessment of the news and prospects for Apple this year.
Apple shares (AAPL) have lost more than 10% in the last month, well below the performance of the broader market – the Nasdaq Composite tech index is down 4.35% and the S&P 500 is up 0.72% over the period.
Not the last factor in the decline in Apple shares was the publication of a report by the authoritative publication Nikkei Asia on the company’s supply chain research, which showed a sharp decrease in orders for the production of iPhone 12 mini with 5G by as much as 70% in the first half of 2021. The company has also (presumably) cut its overall smartphone production by about 20% from its December plans.
Although the information was not confirmed by Apple itself, the news had a negative impact on investor sentiment. The release of the iPhone 12 lineup last October was highly anticipated as Apple delayed the release of its first 5G modem smartphones. The start of sales and the first data showed a very optimistic outlook and Apple shares rose more than 80% in a difficult year of the pandemic.
However, analysts said that investor reaction to the news from the Nikkei was exaggerated, as was the decline in stocks in recent weeks.
The experts gave the following explanations for the production cut.
“The iPhone 12 mini has a much smaller battery than the older iPhone 11, which costs about the same. A 5G phone usually uses more power, so consumers will be reluctant to buy a phone that doesn’t have a good battery, ”said Isaiah Research.
Analyst Jeff Poo of GF Securities added: “Consumers can immediately see the difference in screen size. With similarly priced models, many consumers will simply opt for the older iPhone 11 with a larger screen, as they don’t expect much from 5G yet. ”
Daniel Martins, founder of investment company DM Martins Capital Management LLC, gave several reasons how the situation with the iPhone 12 mini could affect Apple:
according to the report, the projected production cut will only affect the first half of the year and probably the second calendar quarter to a greater extent.
At the same time, the Nikkei agency did not change its December estimate regarding Apple’s order to its suppliers for the production of about 230 million iPhones (both new iPhone 12s with 5G and older models) this year, which is 30% more than before the pandemic. Thus, the second half of 2021 is likely to offset the decline in the second calendar quarter.
In addition, investors should keep in mind that the iPhone 12 mini is just one model that initially had the lowest sales of the entire line, according to vendor data. In the first months of sales, demand for the iPhone 12 Pro and iPhone 12 Pro Max was particularly strong, while demand for the iPhone 12 was in line with forecasts, and demand for the iPhone 12 mini was described as “a little sluggish.”
In addition, sales of smartphones in the spring seasonally decline – they brought about 18% of total annual revenues in 2019 and 2020 fiscal years.
Another good news is that declining sales of the cheaper iPhone 12 mini in favor of more expensive models, such as the iPhone 12 Pro Max, will drive up the average selling price. If total sales remain the same, this could mean higher total income and possibly better profits.
The last argument, according to the expert, is that it is quite possible that some weakness in sales of the iPhone 12 has already been taken into account in the price of Apple shares.
All of this suggests that buying Apple shares on the current decline may be the right decision, given that estimates of total iPhone shipments in 2021 have persisted, and the world’s largest economies are gradually recovering amid massive coronavirus vaccinations. Apple’s two largest markets, the United States and China, could see strong sales soon as the Chinese economy rebounds rapidly and the Americans just received a $ 1,400 direct payout bill.