The day after Christmas, shares of Apple Inc. (AAPL 1.89%) fell on reports by several media outlets of flagging demand for its recently released flagship iPhone X. A story in Taiwan's Economic Daily reported that Apple was slashing its sales forecast for the AI-enabled smartphone to 30 million units for the quarter from its initial plans of 50 million units.
This report was picked up by several U.S. news sources, causing shares of Apple and a number of its component parts suppliers to fall. At least one analyst thinks this all might just be one big misunderstanding and the problem may be confusion regarding the various iPhone models.
Are sales for the iPhone falling or is the forecast intact? Image source: Apple.
A case of mistaken identity?
The Taiwanese paper cited an unidentified supply chain source for its claims that demand for the iPhone X was coming in below expectations. The paper also reported that Foxconn, Apple's iPhone supplier in China, had stopped hiring additional staff.
Jun Zhang of Rosenblatt Securities issued a note to clients that contradicted media reports. His own research "indicates no further order cuts after the holiday season."
Zhang had previously reported on production and component order reductions for the iPhone 8 and iPhone 8 Plus, as many perspective Apple buyers decided to forego the minimally updated model for the more feature-rich iPhone X. Zhang believes the reports emanating from Taiwan are confusing previously issued production cuts for the iPhone 8 with the iPhone X.
He also wrote that he saw no reduction in component orders for the "3-D Sensing" technology which powers the Face ID feature on the iPhone X. The front facing camera that enables that technology is a key element of the system. Zhang also said there's no evidence of order cuts for the OLED screens used on the higher-price-point model. These two items are "specific components for the iPhone X," causing the analyst to doubt the veracity of the published reports.
Gossip, rumors, and speculation
Investors may recall that the rumor mill was running full steam leading up to the release of the new iPhone models. Varying reports of production issues related to the redesigned OLED screen, or integration issues with the Touch ID, were common. The financial media was ripe with these reports, causing many investors to doubt Apple's own guidance.
When Apple did report the results for its fiscal fourth quarter, which ended Sept. 30, many were surprised by the solid performance. The company had originally provided revenue guidance in a range between $49 billion and $52 billion, while actually delivering sales of $52.6 billion -- above the high end of Apple's own forecast.
It is also important to note that while Apple issues revenue guidance, it does not provide a forecast regarding the number of devices it will sell, so it's difficult to understand how a publication can cite a reduced forecast for a number that Apple doesn't even provide.
Reports are not evidence
When asked by a reporter about his obituary published in a major American newspaper, Mark Twain was reported to have said, "The reports of my death have been greatly exaggerated." The story may or may not be true, but the lesson gained from the tale is completely valid.
It is important for Foolish investors to ignore unsubstantiated reports and the daily machinations of the stock market and focus instead on the longer term. This could end up being a textbook example of why rumors and speculation should be ignored.
While concerns about future upgrade cycles and slowing growth for the iPhone maker are certainly justified, investors should resist the temptation to act based on reports citing unnamed sources and the idle speculation that is all too common in a world dominated by a 24-hour news cycle.
