Apple itself has admitted that sales will be less than expected as its charge more for less policy seems to have backfired, and its iPhone cash cow has run out of milk.
Meanwhile, analysts say that consumers, especially in emerging markets such as India, are ditching them for cheaper alternatives like those offered by China’s OnePlus.
Now Lumentum Holdings, the main supplier of the Face ID technology in the latest generation of iPhones, cut $70 million off its forecasts for revenue on Monday, knocking another five percent, or around $50 billion off Apple’s value in morning trade on Wall Street.
Lumentum blamed the cut in numbers it gave initially been just 12 days ago on a client that was “one of our largest... for laser diodes for 3D sensing”, which analysts said could only be Apple.
Screen maker Japan Display cited lower smartphone demand in cutting its outlook, while British chipmaker IQE also said it expects a material reduction in its financial performance in the current year.
Three analysts said that Lumentum’s forecast pointed to a reduction of 18 million to 20 million iPhones on earlier estimates, based on average selling prices for 3D sensing parts.
“Apple could have accumulated too much Lumentum inventory, and needs to work it off, in which case the unit shortfall is less, although it is still indicative of weak iPhone sales.” D.A. Davidson analyst Mark Kelleher said.
In the fourth quarter, Apple sold 46.9 million iPhones, missing analyst expectations of 47.5 million iPhones, according to FactSet.
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.
Longbow Research analysts said spot checks with Apple’s Taiwanese suppliers late last week highlighted 20 percent to 30 percent iPhone order cuts related mainly to iPhone XR and XS Max, and 20 percent to 25 percent order increases for older iPhone models.
Apple started selling iPhone XS and XS Max in September and XR model last month. Lumentum’s chips are not used in phones older than last year’s iPhone X.
Apple tried to talk up the amount of cash it was making from services although bankers are not that happy with what Jobs' Mob has done about Apple Pay and are making their displeasure known.
Apple has lost $120 billion in market capitalisation since the last trading day of September, and many analysts are warning that the brief days of Apple being a trillion dollar company are over. Even Apple cheerleaders like Forbes are saying that Apple's current price of $195 per share is too high.
"I believe the perception that Apple is entering a slow-to-growth mode outweighs the reported EPS metrics, and justifies a discount to the market’s valuation. The Street values net income growth much more highly than earnings per share growth, and thus Apple's aggressive share repurchase programme is not necessarily a value creator in the short term. Also, the chances of further tax reform are close to zero, so I don't expect any more material reductions in Apple's reported tax rate", said Forbes' Jim Collins. He said said the company share price would have to fall to $170 before it would be a good deal.
What we think happened is that in the last few years Apple coasted on Tim Cook's financial footwork and forgot that it needed new products to capture the public's attention. When the innovation gap came too wide to cross, Cook's answer was to boost margins and prices rather than think of anything new. Jobs, for all his faults, did manage to save Apple with a couple of products which worked - the iPod and iPhone - but even he was running out of ideas before the end (iPads anyone?) and the issue of what to do next was never resolved.