Apple loses $64 billion in stock value as Wall Street is in 'full panic mode' on iPhone demand

  • Apple's stock is cumulatively down 7.1 percent in the three trading sessions through Monday, wiping out $63.9 billion of shareholder value. The decline was sparked by key Apple partner Taiwan Semiconductor Manufacturing's weaker-than-expected guidance Thursday morning.
  • "Heading into Apple's much anticipated March (FY2Q18) quarter next week the Street has gone into 'full panic mode' as supply chain checks out of Asia indicate that June iPhone shipments are trending well below expectations," GBH Insights analyst Daniel Ives writes in a note to clients Tuesday.
  • Fred Hickey, editor of High Tech Strategist, believes TSMC's poor guidance is a precursor to a chip sector and stock market drop.

Disappointing guidance from key iPhone suppliers is raising worries about Apple shares and could signal the death of the technology-driven stock rally.

Apple's stock is cumulatively down 7.1 percent in the three trading sessions through Monday, wiping out $63.9 billion of shareholder value. The decline was sparked by Taiwan Semiconductor Manufacturing's weaker-than-expected guidance Thursday morning.

The world's largest semiconductor foundry and key Apple chip partner said its revenue forecast range for the second quarter is $7.8 billion to $7.9 billion versus the Wall Street estimate of $8.8 billion. The company blamed "weak demand" in the mobile sector for its forecast.

"Heading into Apple's much anticipated March (FY2Q18) quarter next week the Street has gone into 'full panic mode' as supply chain checks out of Asia indicate that June iPhone shipments are trending well below expectations," GBH Insights analyst Daniel Ives wrote in a note to clients Tuesday.

One veteran industry analyst believes TSMC's poor guidance is a precursor to a chip sector and stock market drop.

"TSM's warning this A.M. likely puts the kibosh on the semiconductor (SOX) rally. SOX is a leading indicator for overall stock market and has been rock-solid (relative strength) past 2 yrs. Additionally it's open season on AAPL, the highest valued stock, and its suppliers," Fred Hickey, editor of High Tech Strategist, wrote in on social media Thursday.

It didn't take long for a top Wall Street firm to significantly lower its iPhone forecasts. A day after TSMC's warning Morgan Stanley reduced its June quarter iPhone unit estimate to 34 million from 40.5 million versus the nearly 43 million average estimate.

"We expect Apple to report an in-line March quarter, but are cautious into earnings on May 1 due to our belief that June quarter consensus estimates need to be revised lower," analyst Katy Huberty wrote Friday. "Apple's capital return announcement could amount to a 'sell the news' type of event, especially if forward estimates are revised materially downward."

Another important Apple supplier gave dramatically lower June quarter guidance Monday. Austria-based AMS, a supplier of optical sensors used in the iPhone X, said it expects sales for its second quarter to be in the range of $220 million to $250 million, down nearly 50 percent from its first quarter.

"We are not able to discuss the specific customer, but we are seeing significantly lower business from a large smartphones program and that is having a strong impact on the consumer business and the company as a whole," AMS' head of investor relations, Moritz Gmeiner, told Reuters.

Wall Street blamed poor iPhone X demand for both suppliers' weak guidance. As a result, J.P. Morgan predicts other semiconductor suppliers will report June quarter results below expectations.

"TSMC's June quarter guidance and ams's guidance are further evidence of decelerating Apple demand (with iPhone X demand being particularly weak)," wireless semiconductor analyst Bill Peterson wrote in a note to clients Tuesday. "As such, we believe consensus revenue/EPS estimates for the June quarter are too high, and we lower our estimates for wireless semiconductor companies under coverage."

Mizuho Securities now estimates demand for higher-end new iPhone models will materially fall in the second half of 2018.

The firm told its clients Monday it estimates iPhone production will decline by 2 percent year over year in the second half of 2018, with new models such as iPhone 9 and the successor to iPhone X down 15 percent year over year.

Apple did not immediately respond to a request for comment.