Analysts from JPMorgan Change iPhone 16 Demand Forecast Within Three Days

Apple shares are currently trading around $227 on Wednesday afternoon, giving the company a market capitalization of $3.45 trillion. As shares are near their all-time highs, investors are concerned about the sudden change in Wall Street analysts' outlook on iPhone 16 demand. The excitement around the AI-enabled iPhone and its potential to trigger a massive upgrade cycle seems to have been overestimated this autumn, at least for now.

Analysts' Change of Opinion

On September 27, a team of JPMorgan analysts led by Samik Chatterjee and Joseph Cardoso wrote a note to clients titled "Lead Times Suggest Slower Initial Demand for Pro Models Starting to Correct." In this note, they used their Apple Product Availability Tracker, which indicated that lead times for iPhone 16 models were moderating. The lead times for base models had seen a significant reduction, while Pro models remained stable. They concluded that the initial weaker demand for the Pro models was likely a temporary issue, with momentum expected to increase as the release of Apple Intelligence approaches.

Excerpt from the Note

The note stated that in the third week of their Apple Product Availability Tracker, delivery lead times showed trends which, if continued, would explain the weaker lead times for the Pro models in the initial weeks as an aberration led by a combination of better supply mix and delay in pick up in momentum from higher-end consumers waiting for the release of Apple Intelligence. However, on October 1, JPMorgan analysts changed their outlook on iPhone 16 demand, confusing their clients. The note was titled "Near-term Upside Likely Limited with AI Availability the Gating Factor; However, AI-Upgrade Cycle Expectations Remain Intact."

Change in Expectations

The note mentioned that their recent checks via their lead time tracker showed a more muted momentum in early orders for the Pro models relative to their original expectations. This was likely due to the unavailability of AI capabilities, with consumers likely delaying purchases until the features are available and the value proposition is better understood. As a result, they moderated their near-term iPhone unit forecast, expecting aggregate iPhone volumes to reach approximately 126 million in the second half of 2024, down from the previous estimate of 130 million and 132 million a year ago.

Barclays' Analysis

On Tuesday, Barclays analysts led by Tim Long and George Wang informed clients after conducting supply chain checks. They discovered that Apple likely cut production of the new phone for the December quarter due to weaker-than-expected demand. Several reports have been cited showing that the much-anticipated AI iPhone launch cycle has likely underperformed: - No AI-Fueled Upgrade Supercycle? Apple iPhone 16 Discounts Offered At Major Chinese Online Retailers - Apple Slips On Pre-Order Analysis Showing Weak iPhone 16 Pro Demand - Apple's iPhone 16 Sales Falling Short Of Expectations; DigiTimes Says - Barclays Analysts Find "Weak" iPhone 16 Demand After Supply Chain Check

Public Reaction

In response to the JPMorgan flip-flop, users have expressed their views: - "Stock adds over $1.6 Trillion in “value” based on declining sales of main product. What a world." - @lemmylemon8 - "Who can afford any luxury items these days?" - @realZiiggii - "With the slight drop in projections, curious to see how Apple plans to adapt and keep up its market share." - @SpyMk2124 - "Iphone sales are actually much worse. No idea why JP Morgan things it will slightly lower." - @Vshan_Crypto

Bottom Line

This sudden change in the forecast for iPhone 16 demand by JPMorgan analysts has raised eyebrows and caused some concern among investors. It's a reminder that even the most seasoned analysts can sometimes get their predictions wrong. The question now is, how will Apple respond to this change in market sentiment, and what impact will it have on its future strategies? We'd love to hear your thoughts on this. Please share this article with your friends, and remember to sign up for the Daily Briefing, which is every day at 6pm.