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Apple to Ship Fewer New Phones; Many Remain Bullish on Company’s Stock

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Apple has said it expects to ship 80 million new model iPhones this year, a 20 percent drop from what it had planned at the same time last year, the Nikkei reported on Friday, citing industry sources.

Apple executives have asked its parts suppliers to make about 20 percent fewer components for the three new iPhones it plans to launch in the second half of 2018, compared to last year’s plans for its iPhone X and iPhone 8 models, Nikkei is reported. “Apple is quite conservative in terms of placing new orders for upcoming iPhones this year,” sources in the supply chain told the Nikkei Asian Review.

The report comes at a time of decreasing smartphone sales after years of strong growth.

Respected Apple analyst Ming-Chi Kuo has said that Apple’s pricing strategy will be “more aggressive” for the three iPhones rumored for September of this year in an effort to boost shipments of the models this year.

What Kuo says is behind the aggressive pricing strategy is Apple’s “concern over the negative impact of a higher price” for its 2018 iPhones, he told Macrumors. “Last year, the company received some blowback on the top-tier pricing of its iPhone X, which began at $999 in the United States for 64GB.

Kuo told the news site that the 6.5-inch OLED “iPhone X Plus” will be priced between $900 and $1,000; the second generation OLED iPhone X will be priced between $800 and $900; and the new 6.1-inch LCD iPhone will cost $600 to $700. He added: “We forecast that Apple will adopt a more aggressive price policy for the following reasons: (1) concern over the negative impact of a higher price in a mature smartphone market on selling momentum, (2) improved cost structure, which is mainly attributed to assembly yield improvements of end product & 3D sensing and cost reduction of components, and (3) increasing users of Face ID benefiting the promotion of the Apple service and ecosystem.”

The analyst also mentioned that he believes Apple will announce all three new iPhone models at an event in September, and that all three iPhones will launch in September, including the LCD model which some reports have previously pegged for a November debut.

In May, Bank of America, among others, recommended that its clients buy Apple stock, noting, “We believe there are five reasons why the stock should outperform (1) underlying iPhone demand is better than expected. The ASP reduction is amplified by 1.8mn of channel inventory reduction (of high end units), (2) GM has upside in F19 given tailwind from component cost reduction and tailwind from FX, (3) continued strong capital returns with $100bn of new buyback authorization (F19 share count down 7% without incorporating continued high level of buybacks post next 5 qtrs), and 16% increase in dividend, (4) continued strong growth in Services rev across geographies (board based strength with lower relative contribution from licensing), and (5) strong demand for wearables (Apple watch, AirPods and Beats) drove 50% y/y growth. Investor focus will soon shift to new iPhones to be released in fall of 2018 (battery replacements not materially elongating replacement cycles).”

By Howard M. Riell

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