Rosenblatt Projects 47% Downside In Apple Shares, Warns Of Drop In iPhone Production

Early optimism surrounding Apple Inc.'s AAPL iPhone 11 is slowly giving way to doubt, with the primary reason being weakness in the critical Chinese market. 

The Analyst

Rosenblatt Securities analyst Jun Zhang maintained a Sell rating on Apple with a $150 price target.

Rosenblatt Predicts Steep iPhone Production Declines 

Apple's total iPhone sales in China plunged 30% year-over-year in November, Zhang said in a Tuesday note, citing Rosenblatt channel checks. (See his track record here.)

The analyst attributed the weakness to budget model iPhone 11 sales cannibalizing sales of old iPhone models and the high-end iPhone 11 Pro.

The initial production increases in late September and early October were due to the earlier launch of the iPhone 11 compared with iPhone XR, which was launched in October 2018, he said.

Rosenblatt is modeling a 60% sequential drop in iPhone 11, Pro and Max production in the March quarter and estimates that iPhone SE2 production will amount to 6 million units in both the March and June quarters.

Cumulatively, Zhang said iPhone production is set to drop 40-45% sequentially in the March quarter.

"We expect more production cuts in March as Apple will see increasing headwinds from aggressive 5G smartphone launches in China and 5G service promotions in China begin in March," the analyst said. 

Rosenblatt said it encourages investors in the Apple supply chain to look for potential headline risks from Apple in the March quarter.

Price Action

Apple shares were in record high territory Tuesday and were trading 0.441% higher at $281.02 at the time of publication.

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Photo courtesy of Apple.