Apple shares drop 2% after investors worry over soft demand of iPhones

Shares of Apple Inc dropped nearly two percent on Tuesday as investors worries intensified about soft demand for iPhones after a warning from a company that supplies components for smartphones.

An Apple logo is seen on the building's facade. Image: Reuters

An Apple logo is seen on the building's facade. Image: Reuters

South Korean chipmaker SK Hynix Inc said following its quarterly report that it expected smartphone demand to stagnate, echoing a similar warning last week from Apple supplier Taiwan Semiconductor Manufacturing Co Ltd.

Concerns ahead of Apple’s quarterly report next Tuesday have shaved 9 percent from its stock price in the past five sessions, erasing $80 billion of its stock market value.

“The bar may not have been set low enough,” Wedbush senior trader Joel Kulina said of Wall Street’s declining expectations for iPhone shipments. “There’s still no visibility, and that’s going to keep a lot of money on the sidelines.”

SK Hynix sells memory chips across the smartphone industry, as well as to companies making laptops, servers and other kinds of computers.

Also rattling Apple investors, European chipmaker AMS on Monday warned of a downturn owing to weak orders from one of its main customers. AMS did not name the customer, but analysts estimate that Apple is responsible for half of the Austrian company’s revenue.

GBH analyst Daniel Ives said in a client note on Tuesday he now expects Apple to ship 212 million iPhones in fiscal 2018, down from a previous estimate of 221 million.

Apple and investors had been betting that the high-end iPhone X, released last November, would rejuvenate iPhones sales in a global smartphone market that has become saturated in recent years.

“It’s not a flop, but it’s a mild disappointment relative to previous upgrade cycles,” said Canaccord Genuity analyst Michael Walkley.

Smartphones account for two thirds of Apple’s revenue, about the same as three years ago, despite Chief Executive Tim Cook’s attempts to expand further into markets like music and smart watches.

Updated Date: Apr 25, 2018 16:01 PM