Why Apple Stock Suddenly Fell 4 Percent Despite Strong iPhone Sales

Tim Cook

Apple CEO Tim Cook has said multiple times that the iPhone is the most popular smartphone in China. Stephanie Keith/Getty Images

Apple stock, which was recommended by experts as the only safe investment in today’s turbulent stock market not long ago, surprisingly tumbled four percent during Monday’s early trading after a key supplier of iPhone components signaled that Apple was going to make fewer iPhones due to falling demand.

Lumentum, a laser manufacturer that makes components for iPhones’ front-facing cameras that enable facial recognition (Face ID), announced a reduced production forecast for the second fiscal quarter in 2019 (September 2019 to December 2018) on Monday, citing an order cutback by a key customer.

“We recently received a request from one of our largest industrial and consumer customers for laser diodes for 3D sensing to materially reduce shipments to them during our fiscal second quarter for previously placed orders that were originally scheduled for delivery during the quarter,” Lumentum CEO Alan Lowe said in a statement. 

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Although Lumentum didn’t drop names, the customer in question is believed to be Apple. According to Lumentum’s latest annual filings, Apple is its largest customer, accounting for 30 percent of the company’s revenue.

Before the weekend, another of Apple’s major component suppliers also cut back its revenue outlook for the rest of 2018. On Friday, Skyworks Solutions, a semiconductor producer that makes wireless chips for Apple devices, saw a 8.6 percent drop in its shares after posting below-expectation revenue guidance for the September-December quarter.

Wall Street analysts blamed Apple for the semiconductor maker’s gloomy outlook. “We are downgrading Skyworks Solutions to neutral from buy post the earnings season based on broad smartphone weakness observation in China and disappointing iPhone XR unit sales,” Citigroup analyst Atif Malik wrote in a note to clients after the bank downgraded Skyworks Solutions from “buy” to “neutral.”

However, Malik’s worry has yet to be reflected in Apple’s numbers. As of now, the iPhone is still the most popular smartphone in China, despite the new models’ hefty prices.

During Chinese e-commerce giant Alibaba’s annual shopping extravaganza on Sunday, dubbed “Double 11” (because the event falls on November 11 every year), Apple came out as the best-selling mobile phone brand, beating rivals such as Samsung and Huawei, according to Alibaba’s numbers recapitulating the record-breaking one-day shopping event.

During the event, Apple raked in over 100 million yuan ($14.36 million) in iPhone sales, although Alibaba didn’t release specific models sold.

In Apple’s most recent quarterly earnings report, unit sales of iPhones remained flat from a year ago, but Apple’s total revenue jumped 30 percent, largely thanks to the new iPhones’ higher prices.

Apple also denied unit sales as a relevant measure of the company’s performance. In fact, during its third-quarter earnings call two weeks ago, Apple CFO Luca Maestri said the company would stop reporting unit sales in future releases.

Why Apple Stock Suddenly Fell 4 Percent Despite Strong iPhone Sales