Bloomberg’s slowing iPhone demand story: What the analysts are saying

It feels like there is something fishy going on here.”

Excerpts from the notes I’ve seen. More as they come in:

Wamsi Mohan, Merrill Lynch: Media reports Apple iPhone 13 order cuts, slower demand. Bloomberg recently reported that Apple has informed its suppliers that demand for iPhone 13 is slowing. Earlier, it had reported iPhone order cuts of 10mn (vs. initial plan of 90mn); however, now, as per Bloomberg, Apple believes that some of the demand may be lost. While we have not confirmed independently of any supply cuts, we note that our iPhone estimates are already below Street estimates (79mn vs. 82mn for the Dec quarter, and 46mn vs. 56mn for the Mar quarter). As such, we leave our iPhone estimates unchanged. Neutral. $160. 

Chris Caso, Raymond James: Thoughts on iPhone Demand. The nature of the article is much more ambiguous than typical Apple supply chain reports. Historically, the best gauge of demand has been the production forecast, and whether that forecast is increasing or decreasing. The article doesn’t mention changes to the production forecast, but only that Apple has reportedly told suppliers that demand had slowed, which is a more ambiguous statement. Our own checks haven’t uncovered significant changes thus far. Given the supply constraints facing Apple at the start of the quarter, it would certainly be surprising if Apple were to cut production, and we would view production cuts as a negative read on demand. Outperform. 

Mark Cranfield, Bloomberg: Tech Bears Being Burned Before Cautious Despite Apple Warning. There has been a bit of head scratching among tech investors in Asia at the limited reaction to Apple’s warning about falling iPhone demand. Nasdaq futures and the shares of some Apple suppliers are subdued after the report. That could be because traders don’t want to be burned again by selling too early… In the meantime Asian investors will have to wait for U.S. traders to log on later today to get a clearer read on the response to Apple and tech stocks more broadly. But, if the problem really is dampening demand, it will be hard to put a positive spin on that.

Neil Cybart, Above Avalon: It feels like there is something fishy going on here. One can’t help but wonder if some funds either front ran the report (i.e. they knew this information, regardless of its accuracy, was going to be given to Bloomberg and reported on) or if the information was provided to Bloomberg by certain parties after the runup in shares on Tuesday. The former seems more likely… The way this strategy would work is that a fund(s) began buying Apple shares on Tuesday morning with the intention of kicking off a momentum-fueled move higher in price. It takes a surprisingly small amount of demand to temporarily get AAPL shares moving higher before additional demand quickly enters the market. As AAPL shares shot higher, more players jumped in with algorithms picking up the stock’s outperformance. The fund(s) that kicked off the initial move higher sold their shares (making a profit) and then went further by shorting the stock (selling shares that they don’t currently have) as the stock continued to soar. The plan is to buy the shares needed to close out short positions at a lower price, say, after a questionable report about iPhone demand was published. AAPL shares traded down as much as 7.3% from the top put in on Tuesday to the low earlier today. Similar strategies involving options are also possible.

35 Comments

  1. Tommo_UK said:
    Is “Debby Wu” related to infamous AAPL nay-sayer Shaw “Wong Way” Wu? Just asking.

    0
    December 3, 2021
    • Ken Cheng said:
      Doesn’t bother me one way or another, but your alliterative joke, in this modern day and age, would be considered in bad taste or worse, since it’s based upon a stereotyped way of speaking. Just something to think about.

      4
      December 3, 2021
      • Bart Yee said:
        It bothers me because my wife’s family and my uncle’s family are all Wongs, ALL of them had to endure this verbal abuse based on their name. At least my father in law (Flying Tigers Air Force 14th) and Uncle (US Marines) both during WW II proved their worth to some but for most of their life they had to keep proving that over and over.

        You can imagine the same for me growing up in the 60’s and 70’s during the Vietnam war and being quite noticeable among only 20 Asians in a class of 600.

        3
        December 3, 2021
        • Robert Stack said:
          @Bart/Ken: Here here! Thank you for bringing this issue up in the respectful way in which you did. All of us need to be reminded of the many subtle ways in which prejudices get reinforced in our daily lives through seemingly innocuous comments or jokes. One of the things I really appreciate about Apple 3.0 site is that the commenters here are mostly respectful towards others, even when they disagree (ergo the recent back and forth on the merits of options trading).

          2
          December 3, 2021
  2. Alan Trerise said:
    Did some of the good little boys and girls scratch iPhone off their list and add MacBook Pro?

    Estimated delivery for iPhone is December 13. Estimated delivery for MacBook Pro is December 28.

    3
    December 3, 2021
    • Tommo_UK said:
      @Alan in the UK and many other places, unless you buy from the Apple Store, which outside of the US for iPhones is much less common – people buy direct from carriers as part of their airtime contract – the wait time for the 13 Pro Max is 6-8 weeks.

      The regular 13 is available with seven days, or next day sometimes.

      Demand as usual is skewed to the Pro and Pro Max models for launch, with some people now being given February or even March delivery windows.

      2
      December 3, 2021
    • Alan Birnbaum said:
      Just got my Mac Book Pro after 6 week wait !!

      Isn’t Bloomberg the same source that said Apple was taking chip supply from iPads to use for iPhones ?
      Hmmmmm……..

      0
      December 3, 2021
  3. Fred Stein said:
    What happened to common sense?

    The article was ambiguous with no substantiation and no named sources.

    The article may be exaggeration or even fiction. Apple may have cut back some component orders due to shortage of others. Some models, the lower-end models apparent have met demand.

    Apple’s suppliers may have exceeded expectation.

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    December 3, 2021
  4. Tommo_UK said:
    @Fred
    “The article was ambiguous with no substantiation and no named sources.”

    We’ve seen 20 years of this – all it does is provide more squabbling doomsayers to step on as a stairway to a higher PPS. AAPL is an expert hillclimber at climbing the wall of constant worry created by the dead bodies of gloomy analysts (and in the past paid Microsoft shills) who have fallen in a heap one after the other as the stock accelerated away from them.

    Long may they moan!

    7
    December 3, 2021
  5. Jerry Doyle said:
    It is refreshing to read Neil Cybart’s “Above Avalon” descriptive scenario of what he views happened. It’s the annual libretto of an Apple opera where some in the markets benefit from manipulating the stock. To me it is immoral and the SEC should investigate.

    10
    December 3, 2021
  6. Miguel Ancira said:
    Can we all agree that we are going to hold the stock for the time being? At least for the foreseeable future? At least for the next 3 to 4 years?

    11
    December 3, 2021
    • Bob Goldstein said:
      I have been long since 2000 without selling a share. Have been a happy squirrel socking away acorns. I would like to say yes but I am closing in on the age where I will have to sell some IRA shares because of RMD requirements. The bulk of shares though are in a taxable account and I won’t be touching those. My dividends allow me to make big purchase items such as paying cash for new cars, college tuition and housing expenses for my son, etc. My wife is still working so with her pay, my dividends, pension, we don’t have to sell shares. In September my daughter will be in college and my son will still be in grad school so I may have to reassess then

      10
      December 3, 2021
      • Steven Philips said:
        Bob: You can just transfer the shares to an account outside your IRA. You might still need to sell some shares to cover taxes.

        1
        December 3, 2021
        • Bob Goldstein said:
          Right, the bulk of my shares are in a non IRA account. When I am 72 I will sell the number of shares needed for RMD, pay the taxes with the money and transfer the rest to my regular account. I probably will though use the opportunity to use some of the cash as all these years I have only used AAPL dividends for cash

          1
          December 3, 2021
    • Jerry Doyle said:
      Miguel, I have been invested in Apple for a quarter century. At no time have I ever seen Apple firing on all cylinders as she is doing now where her future looks ever brighter. Apple’s best days lie ahead. 🙂

      2
      December 3, 2021
      • Miguel Ancira said:
        I agree. In my 16 years being invested, the future has never looked brighter.

        3
        December 3, 2021
    • Bob Goldstein said:
      Tommo, I made my big purchase in 2000 that set me up, but I made a later purchase based on your recommendation of buying because of Apple opening up the iPhone SDK which led to the App Store. Thanks

      7
      December 3, 2021
      • Tommo_UK said:
        @Bob I’m so glad to hear my 48,000 posts on AAPL between 2005 and 2014 were useful 🙂

        I remember writing at length at the launch of the iPhone about the half-full screen showing space for missing icons being a dead give-away about an upcoming iPhone SDK in what I called was likely to be the biggest software development opportunity since the advent of the PC! What a long time ago. I’m glad to hear my musings helped you profit.

        3
        December 3, 2021
        • Bob Goldstein said:
          Yes I made a large purchase so thanks again. I basically bet the ranch in 2000 after the Cube caused the stock to crash after earnings. I also remember you leaving and saying you were selling aapl because of stock manipulation. I was happy to see you back on 3.0

          2
          December 3, 2021
          • Tommo_UK said:
            Bob, Oh the Cube debacle was epic! I think that and running up to 2001 was my best buy ever. At one point I had 8000 shares thanks to the buying opportunity of the decade.

            I did get out of trading almost altogether yes … it was more about being fed up with the ride which at the time was torturous, and I had written non stop day in and out about AAPL for almost 10 years. I actually have an archive of my 48,000 posts (I wasn’t joking) which I occasionally skim through for context on current moves and announcements to draw parallels and extrapolate echoes of the past to see how they correlate with the present.

            Several people asked if I’d take funding to start a private AAPL trading board back in 2011/12 but I was largely out of the game except for core holdings then (something I regret a bit in hindsight) but I’d found an incredibly fulfilling and exciting career with a new business venture at the time and work/life balance had begun to really mean something. Writing AAPL everyday in the UK with the time difference meant working through until midnight sometimes, so my time was up.

            I have often thought about re-starting intra-day and swing trading posting in the form a blog with a walled section for real-time commentary but every time I do, I browse 3.0 and decide PED is doing such a good job I’d rather just post here occasionally instead. The urge is strong though, but often fades away. AAPL is a bit like crack – it’s a hard habit to kick when you’ve been in it since 2000 (not speaking from experience of the latter, just for transparency) ^_^

            2
            December 3, 2021
            • Bob Goldstein said:
              The Cube was the best thing that could have happened for me. I was a huge Apple fan, my wife had a Mac Plus, which led me to buy a Mac 7500. I just read everything I could read about Apple, but as I have no financial expertise I felt it was best for me to invest in mutual funds even though I knew after the first iMac the ship was leaving the harbor. My son was a baby and I was just too fearful to do my own investing other than Mutual Funds. I went to Macworld where they announced the Cube. I knew it was underpowered and way too much money so after earnings in 2000 when the stock crashed I knew it was time to get in which I did in a big way. Split adjusted, I think 30 cents a share

              2
              December 3, 2021
            • Gregg Thurman said:
              Oh the Cube debacle was epic!

              I’m convinced the Cube “debacle” was an orchestrated behind-the-scenes PR effort on the part of the Wintel community to bury Apple.

              The “issue” was reported as “cracks” in the plastic case. There were no cracks, what there were were ‘nit’ lines caused in the plastic injection process wherein cooler plastic material came into contact with warner material. This always occurs when flowing molten material turns a corner.

              Once the media got hold of the story they were like a dog with a bone, they wouldn’t let go, despite all that Apple did to explain the “cracks”.

              0
              December 3, 2021
              • Tommo_UK said:
                Gregg, sadly for Apple, and rightly so, if you sell a production on its absolute perfection, manufacturing flaws are just not allowed.

                If it looks like a crack, it’s a crack in the narrative which at the time hinged on the idea of paying an absurdly high price for supposed perfection. It was a good lesson in humility for Apple.

                1
                December 3, 2021
  7. David Baraff said:
    I invested a sizeable amount back 2005 following the announcement that Apple was switching to Intel (which meant to me, at that time, that their future was assured), and followed it up with more purchases over the next few years, though I haven’t bought substantially much more since 2010 or so (comparatively speaking).

    I haven’t parted with any of it, and certainly have zero plans to diversify away from AAPL at the moment.

    This is just the typical manipulation that goes on all the time. Annoying? Yep. Predictable? Yep.

    Every time we have a big reaction like the past few days, and people say “At last! People are seeing the light, and that’s why money is flowing in” I’m like, nope, it’s just more games being played by people. You honestly think that after all this time people are just going to “get it”? A few will, here and there, but if the past few years have proved anything, stupid is everywhere. All the time.

    5
    December 3, 2021
    • Bob Goldstein said:
      Good call on investing based on Intel chip. Anytime before iPhone was a great time to get in. I also made a purchase when the stock went down because of worries about Steve Jobs doing some kind of manipulation. I knew that was BS. I only add shares now by dripping my IRA shares

      1
      December 3, 2021
      • Tommo_UK said:
        Bob, there was a great buying opp post-2008 crash in Jan/Feb 2009 when after having exited trading months earlier having anticipated the crash, the technicals were screaming “BUY” at the then $78 level (that price is etched in miming – I think it’s accurate) – split adjusted price now about $3.

        I think I hadn’t posted anything for 6 months as I ignored the markets during the carnage and focused on getting fit and healthy having sold out a lot in summer 2008, when CNBC had interviewed me and I’d said “sell everything.” They told me the segment was too “hysterical” and controversial so it never ran, but I swallowed my own advice and liquidated 50% of everything, luckily.

        IIRC I popped on to the old Apple Finance Board and posted “sell your grandmother and mortgage your house, go all in on AAPL right now” at about $78 which I think is one of the few times I nailed the bottom to almost the last cent and the exact hour of the rebound from a multi-month decline. Obviously nailing bottoms is easier than knowing when to book profits though, especially when you get greedy, which I was most certainly guilty of on occasion.

        6
        December 3, 2021
        • Bob Goldstein said:
          I remember that crash, it was pretty bad and a lot of people bailed. I learned the hard way before I owned aapl, that timing the market is beyond my ability. That’s why I always remained long, no matter what

          2
          December 3, 2021
        • David Drinkwater said:
          You know, at least for me, looking back at the history of AAPL from 1/1/2000 to present, I see those dips as interesting, and clearly, if you had a time machine, you could have doubled your money (plus or minus the influence of taxes), but what I find far more compelling is to look at the arc of AAPL over the whole of the last 20 years! (Hell, for the last five, it’s been nearly parabolic.) My oldest Apple shares are 7/16/2002 with a cost basis of $0.32. Those little peaks and valleys don’t really don’t mean much in the Big Picture.

          0
          December 3, 2021
    • Robert Paul Leitao said:
      Thank you, David! Yet another long-term shareholder success story! Congratulations!

      1
      December 3, 2021
  8. Bill Haymaker said:
    Well, it does my heart good to follow this thread and board. Thanks PED. It’s interesting how so many stories end the same but have different beginnings. It was the post Y2K crash in the financial markets and the contract furniture business that caused me to walk away and basically sell everything. The business, office building, the expensive house and my wife’s convertible. I had been an Apple fan since the introduction of our first computer (128k Mac) and had followed Steve through his adventure at NEXT where he accomplished what I believed to be the holy grail by putting a useable interface on UNIX. I was so excited when he went back to Apple and pretty much knew what was coming. Interestingly it was finding myself unhooking our 5 disc changers to be replaced by iPods that made me unafraid to go all in on AAPL. (Every nickel). Post that it was the old AFB with TommoUK and Dawntreader that gave me the resolve to ignore the pushback from my siblings and their kids for my “reckless” decision. So thanks again Tommo and Robert. It’s been quite a ride and still don’t see any reason to temper my belief that Apple is going to own the tech sector for at least another decade.

    4
    December 3, 2021
    • Robert Paul Leitao said:
      Bill: Thanks for sharing your story! Yes. You and I go back together to the old AFB days! Thank you so much for sharing the journey through the years! I look forward to reading your comments when you post on Apple 3.0!

      0
      December 3, 2021
  9. Kathy Corby said:
    Love the reference to “Apple’s warning about falling iPhone demand.” Umm, guess I must have missed that press release. And broadcasters on financial TV confidently announce that the company confirmed it has canceled iPhone orders previously placed. So maybe I have to go to Apple‘s investor website more frequently so that I can keep up on the news.

    3
    December 3, 2021
    • David Drinkwater said:
      Yeah, You local “not necessarily the news channels” have turned the sound up to 11, because they know they can. Apple will remain silent and stick to it’s knitting. I will believe Apple/AAPL news when I hear Tim Cook and Luca Maestri say it.

      1
      December 3, 2021
      • David Drinkwater said:
        Should read “your local”, not “you local”. Sorry ’bout that.

        0
        December 3, 2021

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